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Your firm currently supplies audio equipment to car manufacturers. You are thinking about expanding into the home retail market, selling high-quality stereo components directly to consumers. Describe how you would estimate the cost of capital for this expansion. Specifically, what information do you need and how you would estimate it?
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- Ford Motor has a division that finances consumer purchases of autos. To estimate the beta of their division, who would be a comparable firm? Hertz (Auto Rental and Leasing) Bank of America (grants auto loans, mortgages, credit cards) General Motors (another auto manufacturer) Ally Financial (auto financing company)During the last few years, Jana Industries has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program proposed by the marketing department. Assume that you are an assistant to Leigh Jones, the financial vice president. Your first task is to estimate Jana’s cost of capital. Jones has provided you with the following data, which she believes may be relevant to your task: The firm’s tax rate is 40%. The current price of Jana’s 12% coupon, semiannual payment, noncallable bonds with 15 years remaining to maturity is $1,153.72. Jana does not use short-term interest-bearing debt on a permanent basis. New bonds would be privately placed with no flotation cost. The current price of the firm’s 10%, $100 par value, quarterly dividend, perpetual preferred stock is $116.95. Jana would incur flotation costs equal to 5% of the proceeds on a new…During the last few years, Harry Davis Industries has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program proposed by the marketing department. Assume that you are an assistant to Leigh Jones, the financial vice president. Your first task is to estimate Harry Davis’ cost of capital. Jones has provided you with the following data, which she believes may be relevant to your task: •The firm’s tax rate is 35%. •The current price of Harry Davis’ 12.5% coupon, semiannual payment, noncallable bonds with 15 years remaining to maturity is $1105.67. Harry Davis does not use short-term interest-bearing debt on a permanent basis. New bonds would be privately placed with no flotation cost. •The current price of the firm’s 10%, $100 par value, quarterly dividend, perpetual preferred stock is $114.27. Harry Davis would incur flotation costs…
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- Mr. Martínez is the owner of a company dedicated to the production of renewable energy. Nowadays, his business has good cash flows due to the increase in demand in this area. However, to be more competitive he needs cost efficiency with his suppliers. The average financing need ranges between $600,000 and $1,200,000 pesos per year. The following is requested: 1. Introduction, that is, what is expected with the resolution of this exercise. 2. Define first what is the need to solve. 3. Investigate the options offered by financial institutions.Ruby is looking at the results of a Capital Investment Appraisal. The report shows that, assuming a Cost of Capital of 10%, investing in a plant to manufacture a new clothing line would give a positive NPV and an IRR of 23%. Should the company buy the machine? NPV is positive and IRR is less than the Cost of Capital NPV is positive and IRR exceeds Cost of Capital. NPV does not provide enough information. IRR is higher than the Cost of CapitalDuring the last few years, Jana Industries has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program proposed by the marketing department. Assume that you are an assistant to Leigh Jones, the financial vice president. Your first task is to estimate Jana’s cost of capital. Jones has provided you with the following data, which she believes may be relevant to your task: The firm's tax rate is 25%. The current price of Jana’s 12% coupon, semiannual payment, noncallable bonds with 15 years training to maturity is $1,153.72. There are 70,000 bonds. Jana does not use short-term interest bearing debt on a permanent basis. new bonds would be privately placed with no flotation cost. The current price of the firm’s 10%, $100 par value, quarterly dividend, perpetual preferred stock is $116.95. There are 200,000 outstanding shares. Jana would…
- During the last few years, Jana Industries has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program proposed by the marketing department. Assume that you are an assistant to Leigh Jones, the financial vice president. Your first task is to estimate Jana’s cost of capital. Jones has provided you with the following data, which she believes may be relevant to your task: The firm’s tax rate is 40%. The current price of Jana’s 12% coupon, semiannual payment, noncallable bonds with 15 years remaining to maturity is $1,153.72. Jana does not use short-term interest-bearing debt on a permanent basis. New bonds would be privately placed with no flotation cost. The current price of the firm’s 10%, $100 par value, quarterly dividend, perpetual preferred stock is $116.95. Jana would incur flotation costs equal to 5% of the proceeds on a new…You are looking for security for your business. Your firm does highly confidential work so you absolutely must have security. You have found two options. The first option is a high tech solution with door sensors, motion detectors, cameras and card readers for door access. The second option is rather low tech. You would upgrade your door locks and hire a guard to be on duty overnight. The costs for each of these options is shown below. If your cost of capital is 8% which option should you select? Support your answer with the appropriate discounted cash flow analysis. Upfront CostAnnual CostLength of ContractHi Tech$200000$ 8,0007Low Tech$ 10,000$ 50,0003When designing a study on sharing economy, we have the following research hypotheses for Airbnb: H1: The main reason to use Airbnb’s services is to get to know the life of theinhabitants of a given country. H2: The consumer, having a choice of Airbnb and a hotel—assuming the sameprice—will choose Airbnb. H3: People who use Airbnb’s services most often are people under 30, on lowincomes, solo travellers. Prepare a fragment of the questionnaire (6 questions) that will verify the above hypotheses statements. Be sure to indicate the type of question (i.e. open ended, scale, matrix, rating, etc.)