ing the information in the following tablewhat is the incremental operating net cash flow per year of the project for year 1-19? Dunaway Industries is evaluating the idea of expanding their production facility in Cobb County. The CFO gathered the following data. Dunaway Industries spent $ 500,000 researching other sites for their expansion . The equipment needed for the expansion will cost $ 25,600,000 fully installed . The equipment will be depreciated over 20 years to a salvage value of $ 1,000,000 . Dunaway Industries uses straight - line depreciation . If Dunaway accepts the project , the company will sell the equipment for salvage value ( i.e 1,000,000 ) at the end of the life of the project . If Dunaway Industries adds the new equipment , sales are expected to increase by 17,400,000 and costs are expected to increase by $ 10,000,000 . The appropriate tax rate for Dunaway Industries is 30% The capital of the firm includes 70 % of equity and 30 % of debt . Dunaway Industries recently issued a bond with 30 years to maturity that pays a coupon of 7.50 % semiannually . The $ 1,000 par bond sold for $ 956.77 . The market believes that Dunaway Industries will pay a dividend of $ 2.42 ( 2.42 ) their common stock next year and that the dividend will grow at 4.00 % forever . The curren stock price is $ 22.00 .
ing the information in the following tablewhat is the incremental operating net cash flow per year of the project for year 1-19? Dunaway Industries is evaluating the idea of expanding their production facility in Cobb County. The CFO gathered the following data. Dunaway Industries spent $ 500,000 researching other sites for their expansion . The equipment needed for the expansion will cost $ 25,600,000 fully installed . The equipment will be depreciated over 20 years to a salvage value of $ 1,000,000 . Dunaway Industries uses straight - line depreciation . If Dunaway accepts the project , the company will sell the equipment for salvage value ( i.e 1,000,000 ) at the end of the life of the project . If Dunaway Industries adds the new equipment , sales are expected to increase by 17,400,000 and costs are expected to increase by $ 10,000,000 . The appropriate tax rate for Dunaway Industries is 30% The capital of the firm includes 70 % of equity and 30 % of debt . Dunaway Industries recently issued a bond with 30 years to maturity that pays a coupon of 7.50 % semiannually . The $ 1,000 par bond sold for $ 956.77 . The market believes that Dunaway Industries will pay a dividend of $ 2.42 ( 2.42 ) their common stock next year and that the dividend will grow at 4.00 % forever . The curren stock price is $ 22.00 .
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Using the information in the following tablewhat is the incremental operating net cash flow per year of the project for year 1-19? Dunaway Industries is evaluating the idea of expanding their production facility in Cobb County. The CFO gathered the following data. Dunaway Industries spent $ 500,000 researching other sites for their expansion . The equipment needed for the expansion will cost $ 25,600,000 fully installed . The equipment will be depreciated over 20 years to a salvage value of $ 1,000,000 . Dunaway Industries uses straight - line depreciation . If Dunaway accepts the project , the company will sell the equipment for salvage value ( i.e 1,000,000 ) at the end of the life of the project . If Dunaway Industries adds the new equipment , sales are expected to increase by 17,400,000 and costs are expected to increase by $ 10,000,000 . The appropriate tax rate for Dunaway Industries is 30% The capital of the firm includes 70 % of equity and 30 % of debt . Dunaway Industries recently issued a bond with 30 years to maturity that pays a coupon of 7.50 % semiannually . The $ 1,000 par bond sold for $ 956.77 . The market believes that Dunaway Industries will pay a dividend of $ 2.42 ( 2.42 ) their common stock next year and that the dividend will grow at 4.00 % forever . The curren stock price is $ 22.00 .
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