EXERCISE 1: COST OF CAPITALA company wants to raise $50 million to finance the following capital expenditure projects, with their respective rates of retum.Project AProject BProject CProject DProject EProject F4148%10%11%12%13%The various sources and cost of funds are as follows:In millions ofSAmountsCost (after tax)Common shares$2014%Retained eamings1010%106%MortgageBondsQuestions1. What is the company's cost of capital?

To find the cost of capital, we will first need the weightage of each capital class. For that we…

EXERCISE 1: COST OF CAPITAL A company wants to raise $50 million to finance the following capital expenditure projects, with their respective rates of return. Project A Project B Project C Project D Project E Project F 414 The various sources and cost of funds are as follows: In millions of $ 8% 9% 10% 11% 12% 13% Amounts Cost (after tax) Common shares $20 14% 10 10% Retained eaming 10 6% Mortgage 10 7% Bonds Questions 1. What is the company's cost of capital?

EXERCISE 1: COST OF CAPITAL A company wants to raise $50 million to finance the following capital expenditure projects, with their respective rates of return. Project A Project B Project C Project D Project E Project F 414 The various sources and cost of funds are as follows: In millions of $ 8% 9% 10% 11% 12% 13% Amounts Cost (after tax) Common shares $20 14% 10 10% Retained eaming 10 6% Mortgage 10 7% Bonds Questions 1. What is the company's cost of capital?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 16E

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Use Table 8 to answer the next two questions. Assume the committed capital is $100, the management fee is 2.00%, and the carried interest is 20.00%. Year 2015 2016 2017 2018 2019 $5.40 What is the carried interest in 2019? Called-down Paid in capital Mgmt Fees $26 $31 $21 O $11.20 $9.12 $9.85 $10 $12 Table 8 Operating NAV before Carried NAV after Results Distributions Interest Distributions Distributions -$14 $6 $11 $41 $46 $5 $10
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Use Table 8 to answer the next two questions. Assume the committed capital is $100, the management fee is 2.00%, and the carried interest is 20.00%. Year Called-down Paid in capital Mgmt Fees $26 $31 $21 $10 $12 2015 2016 2017 2018 2019 What is the carried interest in 2019? O $9.85 O $5.40 $9.12 4 O $11.20 Table 8 Operating NAV before Carried NAV after Results Distributions Interest Distributions Distributions -$14 $6 $11 $41 $46 $5 $10 है
Baltusrol Inc. has the following three investment opportunities. A P70,000 10,000 B Initial investment Initial working capital required Cash inflows by year: Year 1 P70,000 5,000 P70,000 8,000 P35,000 35,000 10,000 5,000 8,000 P83.000 P1,250 P35,000 10,000 45.000 20,000 2,000 P112.000 P10,000 P4,000 8,000 10,000 98,000 5.000 P125.000 P12,500 Year 2 Year 3 Year 4 Released working capital Total Average annual income Required: 1. Rank the investment opportunities in order of desirability using. A. Payback period. B. Average book rate of return (use average net book value of the investment as the denominator), and C. NPV using a 16% discount rate. 2. Determine the profitability index for each opportunity and rank the investments based on these values.
The management of Revco Products is exploring four different investment opportunities. Information onthe four projects under study follows:Project Number1 2 3 4Investment required ....................... $(270,000) $(450,000) $(360,000) $(480,000)Present value of cashinfl ows at a 10%discount rate .............................. 336,140 522,970 433,400 567,270Net present value .......................... $ 66,140 $ 72,970 $ 73,400 $ 87,270Life of the project ........................... 6 years 3 years 12 years 6 yearsInternal rate of return ..................... 18% 19% 14% 16%The company’s required rate of return is 10%; thus, a 10% discount rate has been used in the present valuecomputations above. Limited funds are available for investment, so the company can’t accept all of theavailable projects.Required:1. Compute the project profitability index for each investment project.2. Rank the four projects according to preference, in terms of:a. Net present valueb. Project profitability…
Subject :- Accounting
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