WACC Weights BetterPie Industries has 3 million shares of common stock out- standing, 2 million shares of preferred stock outstanding, and 10,000 bonds. If the common shares are selling for $47 per share, the preferred shares are selling fo $24.50 per share, and the bonds are selling for 99 percent of par, what would be the weights used in the calculation of BetterPie's WACC? (LG11-4)

WACC Weights BetterPie Industries has 3 million shares of common stock out- standing, 2 million shares of preferred stock outstanding, and 10,000 bonds. If the common shares are selling for $47 per share, the preferred shares are selling fo $24.50 per share, and the bonds are selling for 99 percent of par, what would be the weights used in the calculation of BetterPie's WACC? (LG11-4)

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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Problem 5-3 Calculating Discounted Payback An investment project has annual cash inflows of $3,500, $4,400, $5,600, and $4,800, for the next four years, respectively. The discount rate is 14 percent. a. What is the discounted payback period for these cash flows if the initial cost is $6,200? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the discounted payback period for these cash flows if the initial cost is $8,300? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the discounted payback period for these cash flows if the initial cost is $11,300? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Discounted payback period b. Discounted payback period c. Discounted payback period years years years
76. If 60% financing is available on a certain income property at a loan constant of 11%, what equity cash-on-cash return is available where the overall rate is 10.6%? A: 5.0% B: 10.0% C: 6.5% D: 1.5%
Problem 8-8 Payback (LO4) The following are the cash flows of two projects: Year Project A $ (380) Project B $ (380) 0 210 280 210 280 210 280 210 1234 4 What is the payback period of each project? Note: Round your answers to 1 decimal place. Project A B Payback Period years years
8-16 Three mutually exclusive alternatives are being A considered. Initial investment Annual net income Rate of return A B $43,000 $24,000 4,150 2,500 7.3% 8.3% с $17,000 1,700 6.0% Each alternative has a 20-year useful life with no salvage value. (a) Construct a choice table for interest rates from 0% to 100%. (b) If the minimum attractive rate of return is 7%, which alternative should be selected?
13. An investment requires working capital equal to 15% of the year’s sales revenue to be in place at the start of the relevant year. The sales revenue for the three year project is forecast as £80,000, £100,000 and £90,000. What is the cashflow relating to working capital at time 2? A £1,500 outflow B £3,000 outflow C £1,500 inflow D £3,000 inflow
Investment Rate Compounding A 6.846% Annual B 6.6458% Daily C 6.7245% Quarterly D 6.7107% Monthly The lowest effective rate of return you could earn on any of these investments is closest to: A. 6.846% Your answer is correct. B. 6.921% C. 6.896% D. 6.871%
ces Year 0 1 Cash Flow (A) -$430,000 41,500 2 64,500 3 81,500 4 545,000 Cash Flow (B). -$ 42,500 20,900 12,800 21,100 17,900 The required return on these investments is 10 percent. a. What is the payback period for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b. What is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. c. What is the IRR for each project? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e. d. What is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. e. Based on your answers in (a) through (d), which project will you finally choose? a. Project A Project B b. Project A Project B years years Q Search < Prev 5 of 5 Next L
Problem 6-19 Capital Budgeting with Inflation Consider the following cash flows on two mutually exclusive projects: Year Project A -$ Project B -$ 0 54,000 69,000 1 34,000 33,000 2 29,000 42,000 3 24,000 45,000 The cash flows of Project A are expressed in real terms, whereas those of Project B are expressed in nominal terms. The appropriate nominal discount rate is 10 percent and the inflation rate is 4 percent. Calculate the NPV for each project. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Project A Project B Which project should you choose? Project A Project B

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