Business Finance Homework

- Management of Franklin Mints, a confectioner, is considering purchasing a new jelly bean-making machine at a cost of $312,515. They project that the cash flows from this investment will be $121,450 for the next seven years. If the appropriate discount rate is 14 percent, what is the IRR that Franklin Mints management can expect on this project?
*(Round answer to 2 decimal places, e.g. 5.25%.)***What is the IRR %?** - Hathaway, Inc., a resort company, is refurbishing one of its hotels at a cost of $7,800,000. Management expects that this will lead to additional cash flows of $1,800,000 for the next six years. What is the IRR of this project? If the appropriate cost of capital is 12 percent, should Hathway go ahead with this project?
*(Round answer to 2 decimal places, e.g. 5.25%.)***The IRR of the project is what %?****Should the firm accept or reject the project?** - Whitewall Tire Co. just paid an annual dividend of $1.60 on its common shares. If Whitewall is expected to increase its annual dividend by 2 percent per year into the foreseeable future and the current price of Whitewall’s common shares is $11.66, what is the cost of common stock for Whitewall?
*(Round answer to 2 decimal places, e.g. 15.25%.)***Cost of common equity is what %?** - Seerex Wok Co. is expected to pay a dividend of $1.10 one year from today on its common shares. That dividend is expected to increase by 5 percent every year thereafter. If the price of Seerex common stock is $13.75, what is the cost of its common equity capital?
*(Round intermediate calculations to 4 decimal places, e.g 0.5212 and final answer to 2 decimal places, e.g. 15.25%.)***Cost of common stock %?** - Two-Stage Rocket paid an annual dividend of $1.25 yesterday, and it is commonly known that the firm’s management expects to increase its dividend by 8 percent for the next two years and by 2 percent thereafter. If the current price of Two-Stage’s common stock is $17.8, what is the cost of common equity capital for the firm?
*(Do not round intermediate calculations. Round answer to 0 decimal places, e.g. 15%.)***Cost of common equity %?** - Fjord Luxury Liners has preferred shares outstanding that pay an annual dividend equal to $15 per year. If the current price of Fjord preferred shares is $107.14, what is the after-tax cost of preferred stock for Fjord?
*(Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)***After-tax cost preferred stock %?** - Kresler Autos has preferred shares outstanding that pay annual dividends of $12, and the current price of the shares is $80. What is the after-tax cost of new preferred shares for Kresler if the flotation (issuance) costs for preferred are 5 percent?
*(Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)***After-tax cost preferred shares %?** - Capital Co. has a capital structure, based on current market values, that consists of 50 percent debt, 10 percent preferred stock, and 40 percent common stock. If the returns required by investors are 8 percent, 10 percent, and 15 percent for the debt, preferred stock, and common stock, respectively, what is Capital’s after-tax WACC? Assume that the firm’s marginal tax rate is 40 percent.
*(Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)***After tax WACC %?**