Contemporary Engineering Economics (6th Edition)
Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 15, Problem 10P

The Delta Chemical Corporation is expected to have the capital structure for the foreseeable future as given in Table P15.10.

The flotation costs are already included in each cost component. The marginal income tax rate (tm) for Delta is expected to remain at 40% in the future.

  1. (a) Determine the cost of capital (k).
  2. (b) If the risk-free rate is known to be 6% and the average return on the S&P 500 is about 12%, determine the cost of equity with  β = 1.2 based on the capital-asset pricing principle.
  3. (c) Determine the cost of capital on the basis of the cost of equity obtained in part (b).

Chapter 15, Problem 10P, The Delta Chemical Corporation is expected to have the capital structure for the foreseeable future

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Consider the cashflow (n = 10 years, MARR = e = 14%) Cash Flow A Investment P 180,000 Revenues P 350,000 per year Expenses P 400,000 per year for the first 3 years, decreasing by P 50,000 per year thereafter a. Determine the Annual Worth (AW) of each project. b. Determine the Internal Rate of Return (IRR) of each project. c. Determine the External Rate of Return (ERR) of each project. Salvage Value P 40,000
Consider the following investment opportunity: Capital Investment (End of Year 0) Expenses (per year) Revenues (geometric series) $450,000 $25,000 $60,000 in the first year, increasing 5% per year following Market value (End of Year 20) Study Period (years) MARR (per year) $90,000 20 years 10% 10% Interest Table
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