What is the firm market capitalization

Assignment Help Financial Management

Reference no: EM131535199

A firm has a Capital Structure as follows: Market Value of their debt Is $2,000,000, Preferred stock is $1,000,000. There are 500,000 shares of stock outstanding, with a market value of $20 per share.

The preferred stock price is $50 and pays a $4 dividend. The common stock sells for $20 and pays a $1.00 dividend that is expected to grow by 2% per year. The bonds currently sell for $818, and the coupon rate of 5%. The bonds will mature in 10 years. The firm’s tax rate is 40%.

The company generates $10,000,000 is sales, expenses are $6,000,000. The initial investment of $1,000,000 is depreciated straight-line over 10 years.

What is the firm’s Market Capitalization?

What is the cost of the preferred stock?

What is the cost of the common stock?

What is the cost of the bonds?

What is the firm’s WACC?

What is the OCF?

Based on their Initial investment $1,000,000, what is the NPV of this 10- year project using the firm’s WACC that you calculated in #5 ___?

Based on their Initial investment $1,000,000, what is the IRR of this 10- year project using the firm’s WACC, that you calculated in #5 ______________?

Would you invest in this project?

Explain why_________________.

Reference no: EM131535199

Questions Cloud

Which bond offers the higher after-tax yield : If the bank’s tax rate is 30 percent, calculate the Treasury bond's after-tax yield. Which bond offers the higher after-tax yield?

Accelerated depreciation methods : The manager of a Glidden Paint manufacturing plant is aware that MACRS and BBD are both accelerated depreciation methods;

Recommend for global managers to address ethnocentrism : What strategies would you recommend for global managers to address ethnocentrism?

What is the lira forward discount or premium : Turkish interest rate is 6.5 percent, and the 1-year U.S. interest rate is 5.3 percent, what is the lira's forward discount or premium?

What is the firm market capitalization : What is the firm’s Market Capitalization? What is the cost of the preferred stock? What is the cost of the common stock?

What is the gain-ignoring transactions costs : If the same contract is later sold at 94-12, what is the gain, ignoring transactions costs?

Corporation issued-what is the price of the bond : XYZ Corporation issued a 10 year bond 2 years ago with 5.75% coupon at par. If the current required return on this bond is 4.35%, what is the price of the bond?

Calculate the firm weighted average cost of capital : Calculate the firm’ weighted average cost of capital for the Collins Company assuming the firm has exhausted all retained earnings.

Determine sherry profit or loss : Sherry closed out her position by selling a Treasury bills futures contract for 95.64. Ignoring transaction costs, determine Sherry's profit or loss.

User Account

All Pages