CFIN (with Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
CFIN (with Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
5th Edition
ISBN: 9781305661653
Author: Scott Besley, Eugene Brigham
Publisher: Cengage Learning
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Chapter 11, Problem 8PROB
Summary Introduction

Cost of retained earnings:

Cost incurred by the company by using retained earnings, instead of declaring dividend to common stock holders.

Calculate the cost of retained earnings as follows:

Cost retained earnings=Expected dividendCurrent price+Growth rate

Cost of new common stock is the cost incurred by the company for issue new common stock.

Calculate the cost new common stock as follows:

Cost retained earnings=Expected dividendCurrent price×(1Flotation cost)+Growth rate

TTH has growth rate of 4% and current price is $34 and paid a recent dividend of 4.25. Flotation cost for issuing the new common stock is 8.5%.

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Estefan Industies has a new project available that requires an initial investment of sex million. The project will provide unlevered cash flows of $925,000 per year for the next 20 years. The company will finance the project with a debt-value ratio of 35. The company's bonds have a YTM of 5.9 percent. The companies with operations comparable to this project have unlevered betas of 1.09, 1.17, 1.28, and 1.20. The risk-free rate is 3.6 percent, and the market risk premium is 7 percent. The tax rate is 21 percent. What is the NPV of this project?
no ai   do not answer this question if data is not clear or image is blurr. please comment i will write values . but do not amswer with unclear values. i will give unhelpful.
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