What is the initial cost of the plant-debt-equity ratio

Assignment Help Financial Management
Reference no: EM131012813

Sheaves Corp. has a debt−equity ratio of .8. The company is considering a new plant that will cost $100 million to build. When the company issues new equity, it incurs a flotation cost of 7 percent. The flotation cost on new debt is 2.5 percent. What is the initial cost of the plant if the company raises all equity externally? What is the initial cost of the plant if the company typically uses 55 percent retained earnings? What is the initial cost of the plant if the company typically uses 100 percent retained earnings?

Reference no: EM131012813

Questions Cloud

The average kinetic energy of a sample of gas molecules : T/F As temperature increases, the average kinetic energy of a sample of gas molecules decreases.T/F At constant temperature, the heavier the gas molecules, the larger the average velocity.T/ F Real gas molecules have a volume and exert attractive for..
An argument for a high dividend payout : Which one of the following is cited as an argument for a high dividend payout?
What will the new earnings per share be if the firm : A firm has a market value equal to its book value . Currently , the firm has excess cash of $600 and other assets of $54,000. Equity is worth $6,000. The firm has 500 shares of stock outstanding and net income of $1,035. What will the new earnings pe..
Find the rate of change of production : Suppose that when L= 30 and K=8, the labor force is decreasing at a rate of 2000 labor hours per year and capital is increasing at a rate of $500,000 per year. Find the rate of change of production.
What is the initial cost of the plant-debt-equity ratio : Sheaves Corp. has a debt−equity ratio of .8. The company is considering a new plant that will cost $100 million to build. When the company issues new equity, it incurs a flotation cost of 7 percent. The flotation cost on new debt is 2.5 percent. What..
Find the maximum allowable value of l : AN L76X76X12.7 angle- section is used as cantilever column of length L. Find the maximum allowable value of L if the column is not to buckle when the 12kN axial load is applied . assume E= 200Gpa.
Meaning that the balance of the loan must be paid off : Mike just arranged to purchase a $400,000 vacation home with a 20% down payment. The mortgage has an 8% stated annual interest rate compounded monthly and calls for equal monthly payments over the next 30 years. Meaning that the balance of the loan m..
At what production level the profit increasing : A manufacture of sunglasses has found that the profit S(x) in thousands of dollars. At what production level(s) (interval) the profit increasing. At what levels (interval) is it decreasing ?
Please analyze the asset turnover : I have performed DuPont analysis on Caterpillar Inc. and its closest competitor, CNH Global.

Reviews

Write a Review

Financial Management Questions & Answers

  Firms operating cycle and cash conversion cycle

Domos Corporation turns its inventory five times each year, has an average payment period of 25 days, and has an average collection period of 32 days. Calculate the firm’s operating cycle and cash conversion cycle. Calculate the firm’s total resource..

  Foreign tax credit for the withholding tax

Now you can address the questions about VoiceCo's Activities that were posed at the beginning of the chapter. Simply selling into a foreign jurisdiction may not trigger any overseas income tax consequences, but such income is taxed currently to Voice..

  Terminal Value plays important role in enterprise valuation

Terminal Value plays an important role in enterprise valuation. What factors affect the estimate of Terminal Value? How sensitive enterprise valuation is to Terminal value?

  Weighted average implied by the two outstanding debt issues

Filer Manufacturing has 9.2 million shares of common stock outstanding. The current share price is $62, and the book value per share is $4. Filer Manufacturing also has two bond issues outstanding. Suppose the company’s stock has a beta of 1.2. The r..

  Shares outstanding-what is the price per share

Cool Shoes (CS) had 2014 sales of $518 million. You expect sales to grow at 9% next year(2015), but, decline by 1% per year after until you settle to a long -run growth rate of 4%. You expect EBIT to be 9% of sales, increases in net working capital r..

  Based on economists forecasts and analysis

Based on economists’ forecasts and analysis, one-year T-bill rates and liquidity premiums for the next four years are expected to be as follows: Identify the four annual rates.

  Assuming the market is in equilibrium

You are considering an investment in Keller Corp's stock, which is expected to pay a dividend of $2.75 a share at the end of the year (D1 = $2.75) has a beta of 0.9. The risk-free rate is 5.4%, and the market risk premium is 5.0%. Assuming the market..

  Semiannual coupon bond matures

An 7% semiannual coupon bond matures in 4 years. The bond has a face value of $1,000 and a current yield of 7.4185%. What is the bond's price? What is the bond's YTM?

  Constant-growth dividend discount model

Jand, Inc., currently pays a dividend of $1.40, which is expected to grow indefinitely at 5%. If the current value of Jand’s shares based on the constant-growth dividend discount model is $36.16, what is the required rate of return?

  Contest sponsors have to deposit in the escrow account

The super prize in a contest is $10 million. This prize will be paid out in equal yearly payments over the next 10 years. If the prize money is guaranteed by AAA bonds yielding 3%and is placed into an escrow account when the contest is announced 1 ye..

  State what will be the dollar value of the management team''s

What will be the dollar value of the management team's original $2 million equity investment at the time of the liquidity event?

  Statements concerning liquidity

Which one of the following statements concerning liquidity is correct?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd