QUESTION 3 Warwickshire plc is appraising a new project in a different line of business to its core operations. It has identified a suitable company, Nottingham plc, to use as a proxy. Details are as follows: Equity beta of Nottingham 1.250 Market value of Nottingham's debt: £39m Market value of Nottingham's equity: £45m Corporation Tax rate (both companies): 30% If Warwickshire is finance by £188m of equity and £95m of debt what would a suitable proxy equity beta for Warwickshire plc to use in the appraisal process? OA. 1.053 Ов 1.182 OC.0.778 OD. 1.486 OE. 1.504

QUESTION 3 Warwickshire plc is appraising a new project in a different line of business to its core operations. It has identified a suitable company, Nottingham plc, to use as a proxy. Details are as follows: Equity beta of Nottingham 1.250 Market value of Nottingham's debt: £39m Market value of Nottingham's equity: £45m Corporation Tax rate (both companies): 30% If Warwickshire is finance by £188m of equity and £95m of debt what would a suitable proxy equity beta for Warwickshire plc to use in the appraisal process? OA. 1.053 Ов 1.182 OC.0.778 OD. 1.486 OE. 1.504

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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Calculations to determine which – if any – additional investment opportunities should be undertaken. 1. If the projects are divisible 2. If the projects are not divisible .
K Calculation of individual costs and WACC Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 35% long-term debt, 15% preferred stock, and 50% common stock equity (retained earnings, new common stock, or both). The firm's tax rate is 29%. Debt The firm can sell for $1025 a 12-year, $1,000-par-value bond paying annual interest at a 7.00% coupon rate. A flotation cost of 2.5% of the par value is required. Preferred stock 9.00% (annual dividend) preferred stock having a par value of $100 can be sold for $96. An additional fee of $5 per share must be paid to the underwriters. Common stock The firm's common stock is currently selling for $60 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.70 ten years ago to the $4.40 dividend payment, Do, that the company just recently…
Task 1: The firm has provided the following financial data: Cost of equity is 13.5%. Net income is €2,500. The firm is considering the following investment projects: Size of project IRR of project €1,000 12.0% €1,200 €1,200 €1,200 €1,000 ● ● Project A B C D E Target capital structure is 50% debt and 50% equity. After-tax cost of debt is 8%. 11.5% 11.0% 10.5% 10.0% 1) Determine the firm's weighted average cost of capital. 2) Identify the project(s) that the firm should accept. 3) Identify the total capital budget. 4) If the firm follows a residual dividend policy, determine its payout ratio.
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