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TSL, a supplier of high-end fitness equipment, has some investment opportunities. Due to capital rationing TSL can spend only up to $2,000,000 in new investment opportunities. TSL has the following information to consider. Opportunity to Invest IRR Cost Project A 16% S300,000 Project B 14% $500,000 Project C 12% $500,000 Project D 11% S600,000 Project E 15% S700,000 Project F 18% S500,000 The preferred Capital structure for TSL is: DEBT 50%, Preferred 10% and Equity 40% The Financial manager has also determined that TSL has S120,000 available in retained earnings and they can borrow S250,000 debt without incurring additional financing costs. The cost of debt, preferred shares and equity are currently 6%, 10% and 18% net to taxes respectively as applicable, The range of new financing cost beyond break points are First Break point: Debt 8% Preferred 10% (no change) and Equity 18% Second Break point: Debt 10%, Preferred 10% ( no change) and Equity 20%

TSL, a supplier of high-end fitness equipment, has some investment opportunities. Due to capital rationing TSL can spend only up to $2,000,000 in new investment opportunities. TSL has the following information to consider. Opportunity to Invest IRR Cost Project A 16% S300,000 Project B 14% $500,000 Project C 12% $500,000 Project D 11% S600,000 Project E 15% S700,000 Project F 18% S500,000 The preferred Capital structure for TSL is: DEBT 50%, Preferred 10% and Equity 40% The Financial manager has also determined that TSL has S120,000 available in retained earnings and they can borrow S250,000 debt without incurring additional financing costs. The cost of debt, preferred shares and equity are currently 6%, 10% and 18% net to taxes respectively as applicable, The range of new financing cost beyond break points are First Break point: Debt 8% Preferred 10% (no change) and Equity 18% Second Break point: Debt 10%, Preferred 10% ( no change) and Equity 20%

Essentials Of Investments
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
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TSL , a supplier of high-end fitness equipment, has some investment opportunities. Due to capital rationing TSL can spend only up to S2,000,000 in new investment opportunities. TSL has the following information to consider. Opportunity to Invest IRR Cost Project A 16% S300,000 Project B 14% $500,000 Project C 12% $500,000 Project D 11% $600,000 Project E 15% S700,000 Project F 18% $500,000 The preferred Capital structure for TSL is: DEBT 50%, Preferred 10% and Equity 40% The Financial manager has also determined that TSL has S120,000 available in retained earnings and they can borrow $250,000 debt without incurring additional financing costs. The cost of debt, preferred shares and equity are currently 6%, 10% and 18% net to taxes respectively as applicable, The range of new financing cost beyond break points are First Break point: Debt 8% Preferred 10% (no change) and Equity 18% Second Break point: Debt 10%, Preferred 10% ( no change) and Equity 20% Required: A) Compute the Weighted Average Cost of Capital (WACC and complete the Marginal Cost of Capital (MCC) for the Various range of financing.
Transcribed Image Text:TSL , a supplier of high-end fitness equipment, has some investment opportunities. Due to capital rationing TSL can spend only up to S2,000,000 in new investment opportunities. TSL has the following information to consider. Opportunity to Invest IRR Cost Project A 16% S300,000 Project B 14% $500,000 Project C 12% $500,000 Project D 11% $600,000 Project E 15% S700,000 Project F 18% $500,000 The preferred Capital structure for TSL is: DEBT 50%, Preferred 10% and Equity 40% The Financial manager has also determined that TSL has S120,000 available in retained earnings and they can borrow $250,000 debt without incurring additional financing costs. The cost of debt, preferred shares and equity are currently 6%, 10% and 18% net to taxes respectively as applicable, The range of new financing cost beyond break points are First Break point: Debt 8% Preferred 10% (no change) and Equity 18% Second Break point: Debt 10%, Preferred 10% ( no change) and Equity 20% Required: A) Compute the Weighted Average Cost of Capital (WACC and complete the Marginal Cost of Capital (MCC) for the Various range of financing.
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