Kottinger's Kamp Supplies is considering an investment in new manufacturing equipment. The equipment co annual after-tax inflows of $50,000 at the end of each of the next seven years. The firm's market value debt equity is 14%, and its pre-tax cost of debt is 7%. The flotation costs of debt and equity are 3% and 9%, respec marginal federal and provincial tax rate is 40%. Assume the project is of approximately the same risk as the What is Kottinger's weighted average cost of capital? Multiple Choice 8.91% 11.14% 10.86% 12.04%
Q: You deposit $5000 each year into an account earning 4% interest compounded annually. How much will…
A: Future value is that amount which will be require to paid at some specified period of time. It…
Q: A firm that just paid a dividend of $2.60. It plans to increase dividends by 5% in year one, 10% in…
A: Stock worth or value of the share refers to the discounted value of all the future dividends and the…
Q: Stockton Mineral Operation, Incorporated (SMO), currently has 515,000 shares of stock outstanding…
A: Stock split means when one single share of the company is split into multiple shares. It will…
Q: Project L costs $51,896.49, its expected cash inflows are $11,000 per year for 11 years, and its…
A: IRR is also known as Net Present value. It is a capital budgeting techniques which helps in decision…
Q: For each of the following annuities, calculate the annuity payment. Note: Do not round intermediate…
A: An annuity payment is a series of equal periodic cash flows or payments made at regular intervals,…
Q: If $1,000 is invested in an account that pays 3% interest compounded annually, the total amount A(t)…
A: Future value is a financial concept that refers to the value of an investment or asset at a specific…
Q: The quoted annual rate on your credit card is 14 percent, and there is a $30 annual fee. If your…
A: A credit card is a financial tool that allows individuals to borrow funds from a financial…
Q: Consider historical data showing that the average annual rate of return on the S&P 500 portfolio…
A: A utility function is a decision theory represents an individual's or entity's preferences and how…
Q: Arco Industries has a bond outstanding with 15 years to maturity, an 8.25% nominal coupon,…
A: Yield to call refers to the rate of return anticipated by an investor when a bond or other…
Q: The yield to maturity (YTM) on 1-year zero-coupon bonds is 4% and the YTM on 2-year zeros is 5%. The…
A: Coupon bonds are debt securities that pay periodic interest payments, known as coupons, to the…
Q: List the Opportunities and Threats identified through General Environmental Analyses - Developed and…
A: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only…
Q: Suppose a bond sells at a premium to par value. This implies the bond is a good investment the bond…
A: Bond price, also known as bond quotation or bond value, refers to the market price at which a bond…
Q: A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a…
A: To find the proportions of each asset in the optimal risky portfolio and the corresponding expected…
Q: Gateway Communications is considering a project with an initial fixed assets cost of $1.47 million…
A: NPV is also known as Net Present Value. It is a capital budgeting technique which helps in decision…
Q: Consider a 6%, 15-year, semi-annual payment bond with a par value of $1000. Compute the current…
A: First we need to calculate bond price by using equation below. Bond price will the sum of present…
Q: Suppose a man took out a 30-year loan with an annual rate of 7% to put an addition on his house. His…
A: Loan period = 30 years Annual rate = 7%Computer cost = $1500
Q: overy company RexChem Partners plans to finance a site reclamation project that will req bany…
A: Loan amount =$4.1 million Interest =15%Compounding weekly.Period =4 years Required is to find out…
Q: A share of stock is now selling for $75. It will pay a dividend of $6 per share at the end of the…
A: The Capital Asset Pricing Model (CAPM) is a financial model used to determine the expected return on…
Q: A stock just paid a dividend of $1.01. The dividend is expected to grow at 25.17% for three years…
A: In the given case, we have provided the last paid dividend per share, expected growth rate of the…
Q: The most recent financial statements for Cardinal, Incorporated, are shown here: Income Statement…
A: External financing refers to the funds that are generated from outside the business in the form of…
Q: Complete present value of an ordinary annuity: Note: Round your answer to the nearest cent. Amount…
A: The present value of an annuity (PVA) is the stream of regular interval cashflow discounted at a…
Q: A debt of $5250.56 is repaid by payments of $1085.37 in 4 months, $1063.35 in 13 months, and a final…
A: Here,Question 1:ParticularsValuesPresent value of debt $ 5,250.56Amount repaid after 4…
Q: You need $15,000 to purchase a used car. Your wealthy uncle is willing to lend you the money as an…
A: We need to use loan amortization formula to calculate annual payment of loan.wherePMT = Annual…
Q: Bandon Manufacturing intends to issue callable, perpetual bonds with annual coupon payments and a…
A: The regular interest payment that the bond issuer makes to the bondholder is known as a "coupon…
Q: Happy Trails Senior Living Community is considering investing in solar panels to save on utility…
A: NPV is also known as Net Present Value. It is a capital budgeting technique which helps in decision…
Q: border enterprises had sales of $16.8M last year and 14% net profit margin. its current assets wer…
A: To maintain growth in sales company need to invest in total assets and that may requires funding…
Q: Given an interest rate of 4% and a term of 20 years, how much could the city borrow if they paid…
A: When the borrower borrows a loan from the lender, he has to pay a rate of interest on the borrowed…
Q: You will pay into a pension fund until you are aged 65. You are expected to live until your 80th…
A: Current age=21Retirement=65Period of deposit=44years=44 x 52/2=1144Period of…
Q: Frostbite Thermalwear has a zero coupon bond issue outstanding with a face value of $22,000 that…
A: Here, Current Market Value of Firm $ 24,000.00Face Value of Debt $ 22,000.00Risk Free…
Q: The yield curve for default-free zero-coupon bonds is currently as follows: Maturity (years) 1 2 3…
A: As per pure expectation theory, 1 year rate 1 year from today = [{(1+ 2 year rate)^2/(1+ 1 year…
Q: A couple who borrow $100,000 for 15 years at 7.2%, compounded monthly, must make monthly payments of…
A: When the borrower borrows a loan from the lender, he has to pay a rate of interest on the borrowed…
Q: (Annuity number of periods) Alex Karev has taken out a $220,000 loan with an annual rate of 9…
A: We need to use NPER function in Excel to calculate number of periods. =NPER(RATE,PMT,-PV)WhereNPER =…
Q: enson's Bakery is an all-equity firm that has proje ent. The firm can borrow perpetual debt at 6.1…
A: The combination of a company's equity and debt values is called to as its "leveraged value." It is a…
Q: Suppose that you are thinking about buying a car and have narrowed down your choices to two options.…
A: For the purchases of large ticket items and big ticket items we usually get the purchase financed in…
Q: M eBook One year ago, Henderson Honey issued a 15-year bond for $1,000. The bond's coupon rate of…
A: A bond's current yield is calculated dividing the coupon interest by the current market price of the…
Q: CASE STUDY Cucumber Ltd is a company, based in Manchester UK and established in 2005, that produces…
A: Businesses implement capital budgeting procedures, which are financial processes and instruments, to…
Q: Kolby has made deposits of $140.00 into his savings account at the end of every three months for 20…
A: Given that, Interest Rate per annum = 9% Number of years = 20 Number of Payments…
Q: A. Your firm uses a fixed order quantity system and operates 52 weeks per year. One of the items…
A: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only…
Q: In Elliott Wave Analysis, a full cycle is made up of how many waves? a. Impulse waves only b.…
A: Elliott Wave Theory, developed by Ralph Nelson Elliott in the 1930s, is a method for analyzing and…
Q: Cold Boxes Ltd. issued one hundred $1,000 face value bonds. This bond's current market value of…
A: A bond is a kind of debt security issued by the government and private companies to the public for…
Q: We Pay Insurance Company will pay you $1,575 each quarter for 25 years. You want to earn a minimum…
A: The concept of time value of money will be used here. This concept states that worth of money…
Q: You buy an 8.6% coupon, paid annually, 5-year maturity bond for $960. A year later, the bond price…
A: Yield to maturity is the rate of return that the bondholders will get if they invest in bond and…
Q: Compute the IRR statistic for Project E. The appropriate cost of capital is 8 percent. (Do not round…
A: IRR is the break even rate of return at which present value of cash flow is equal to initial…
Q: The table below shows the profit after tax and the book value of investment for three projects A, B,…
A: The payback period is a simple and widely used method for evaluating investment projects. It…
Q: Connor has $550,000 to invest in a 5 year annuity. Assuming the time value of money is 10%, what…
A: PV = Present Value (in this case, the amount Connor has, which is $550,000)PMT = Annual cash flow…
Q: Deutsche Transport can lease a truck for four years at a cost of €38,000 annually. It can instead…
A: Present value annuity factor is computed as follows:-PVAF = wherePVAF = Present value annuity…
Q: Predicting Bond Values. Bulldog Bank has just purchased a bond with 10 years remaining to maturity,…
A: The present value of any amount or payment is its discounted current worth at a specified interest…
Q: Consider a bond with a Par Value of $1,000. It pays a coupon of 7% and the coupon is paid monthly.…
A: Present value of bond is the sum of discounted value of future coupon interest and discounted value…
Q: Consider the following two projects: Cash flows Project A Project B C0�0 −$ 240 −$ 240 C1�1 100 123…
A: NPV is also known as Net Present Value. It is a capital budgeting technique which helps in decision…
Q: How much will you have at the end of 20 years if you invest $100 at the end of the month starting a…
A: The FV of an investment refers to the combined worth of the cash flows of the investment at a…
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 1 images
- The XYZ Corporation expects to have sales of $15 million this year. Costs other than depreciation are expected to be 80% of sales, and depreciation is expected to amount to $1 million. XYZ is using $5 million debt at 10%. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. XYZ's federalolus - state tax rate is 30%. What is XYZ's expected cash flow from operations? (Assume no other changes occurred.)ABC Co needs to purchase equipment for $2 million. It is estimated that the after- tax cash inflows from the project will be $210,000 annually in perpetuity. ABC Co has a market value debt-to-assets ratio of 60%. The firm's cost of equity is 13%, its pre-tax cost of debt is 8%, and the flotation costs of debt and equity are 2% and 8%, respectively. The tax rate is 34%. Assume the project is of similar risk to the firm's existing operations. What is the dollar flotation cost for the proposed financing? $83,333 $88,000 $92,050 $79,840 $80,000The Berndt Corporation expects to have sales of $15 million. Costs other than depreciation are expected to be 80% of sales, and depreciation is expected to be $1.5 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Brendt's federal-plus-state tax rate is 40%. Berndt has no debt. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. X THAAL Open spreadsheet a. Set up an income statement. What is Berndt's expected net cash flow? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar. $ b. Suppose Congress changed the tax laws so that Berndt's depreciation expenses doubled. No changes in operations occurred. What is Berndt's expected net cash flow? Round your answer to the nearest dollar. $ c. Now suppose that Congress changed the…
- The Berndt Corporation expects to have sales of $12 million. Costs other than depreciation are expected to be 60% of sales, and depreciation is expected to be $2.4 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Brendt's federal-plus-state tax rate is 40%. Berndt has no debt. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. X Open spreadsheetNovel Industries purchases a 41.2 million cyclo-converter. The cyclo-converter will be depreciated by 10.30 million per year over 4 years, starting this year. Suppose Nokela's tax rate is 40%. a) a. What impact will the cost of the purchase have on earnings for each of the next 4 years? b) What impact will the cost of the purchase have on the firm's cash flow for the next 4 years?The Berndt Corporation expects to have sales of $12 million. Costs other than depreciation are expected to be 70% of sales, and depreciation is expected to be $1.8 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Brendt's federal-plus-state tax rate is 35%. Berndt has no debt. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet Set up an income statement. What is Berndt's expected net cash flow? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar. $ fill in the blank 2 Suppose Congress changed the tax laws so that Berndt's depreciation expenses doubled. No changes in operations occurred. What is Berndt's expected net cash flow? Round your answer to the nearest dollar. $ fill in the…
- BASF will invest $14 million this year to upgrade its ethylene glycol processes. This chemical is used to produce polyester resins to manufacture products varying from construction materials to aircraft, and from luggage to home appliances. Equity capital costs 14.5% per year and will supply 65% of the capital funds. Debt capital costs 10% per year before taxes. The effective tax rate for BASF is 36%. (a) Determine the amount of annual revenue after taxes that is consumed in covering the interest on the project’s initial cost. (b) If the corporation does not want to use 65% of its own funds, the financing plan may include 75% debt capital. Determine the amount of annual revenue needed to cover the interest with this plan, and explain the effect it may have on the corporation’s ability to borrow in the future.3) Your employer is considering an investment in new manufacturing equipment. The cost of the machinery is RO 180,000 and will provide annual after-tax cash flows of RO 24,500 for 15 years. The equity financing represents three times the percent of debt financing. The risk free rate is 6% and the expected market returns is 11%. The firm's systemic risk is 1.25. The pretax cost of debt is 8%. The flotation costs of debt and equity are 2.5% and 5.5%, respectively. The firm's tax rate is 40%. Assume the project is of approximately the same risk as the firm's existing operations. 3.1. What is the weighted average cost of capital? 3.2 Ignoring flotation costs, what is the NPV of the proposed project? 3.3. After considering flotation costs, what is the NPV of the proposed project? 3.4. What is your recommendation? Why?eEgg is considering the purchase of a new distributed network computer system to help handle its warehouse inventories. The system costs $55,000 to purchase and install and $32,000 to operate each year. The system is estimated to be useful for 4 years. Management expects the new system to reduce the cost of managing inventories by $61,500 per year. The firm’s cost of capital (discount rate) is 11%. The firm is in the 30% income tax bracket and uses double-declining-balance (DDB) depreciation with no salvage value. Given a four-year life, the DDB depreciation rate is 50% (i.e., 2 × 25%). In year four, record depreciation expense as the net book value (NBV) of the asset at the start of the year.
- Machina Corporation is financing an ongoing construction project. The firm needs $8 million of new capital during each of the next three years. The firm has a choice of issuing new debt and equity each year as the funds are needed, or issuing the debt now and the equity later. The firm's capital structure is 40 percent debt and 60 percent equity. Flotation costs for a single debt issue would be 1.6 percent of the gross debt proceeds. Yearly flotation costs for three separate issues of debt would be 3.0 percent of the gross amount. Ignoring time value effects due to timing of the cash flows, what is the absolute difference in dollars saved by raising the needed debt all at once in a single issue rather than in three separate issues?A company is deciding whether to lease or buy new equipment. The equipment can be purchased for $70,000 or leased for a 5-year period for $8,000 per year (due at the beginning of each year). The firm can borrow at 14%. The equipment has a CCA rate of 25%. Salvage value in 5 years is expected to be $4,000. The company's marginal tax rate is 33%. Calculate PV CCATS. Round the PV CCATS to 2 decimals (e.g 22.05), and the unit is $. Your Answer: Answer unitsMachina Corporation is financing an ongoing construction project. The firm needs $8 million of new capital during each of the next three years. The firm has a choice of issuing new debt and equity each year as the funds are needed, or issuing the debt now and the equity later. The firm's capital structure is 40 percent debt and 60 percent equity. Flotation costs for a single debt issue would be 1.6 percent of the gross debt proceeds. Yearly flotation costs for three separate issues of debt would be 3.0 percent of the gross amount. Ignoring time value effects due to timing of the cash flows, what is the absolute difference in dollars saved by raising the needed debt all at once in a single issue rather than in three separate issues?a. $0b. $171,387c. $140,809d. $156,098e. $134,400