subject
Business, 21.04.2020 04:24 jayzeptor

Hankins, Inc., is considering a project that will result in initial aftertax cash savings of $6.5 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. The firm has a target debt-equity ratio of .64, a cost of equity of 13.4 percent, and an aftertax cost of debt of 5.9 percent. The cost-saving proposal is somewhat riskier than the usual project the firm undertakes; management uses the subjective approach and applies an adjustment factor of +1 percent to the cost of capital for such risky projects.
Required:
(a) Calculate the WACC. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.)
(b) What is the maximum cost the company would be willing to pay for this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)

ansver
Answers: 1

Another question on Business

question
Business, 22.06.2019 07:50
The questions of economics address which of the following ? check all that apply
Answers: 3
question
Business, 22.06.2019 10:50
The uptowner just paid an annual dividend of $4.12. the company has a policy of increasing the dividend by 2.5 percent annually. you would like to purchase shares of stock in this firm but realize that you will not have the funds to do so for another four years. if you require a rate of return of 16.7 percent, how much will you be willing to pay per share when you can afford to make this investment?
Answers: 3
question
Business, 22.06.2019 13:30
The purpose of safety stock is to: a. eliminate the possibility of a stockout. b. control the likelihood of a stockout due to variable demand and/or lead time. c. eliminate the likelihood of a stockout due to erroneous inventory tally. d. protect the firm from a sudden decrease in demand. e. replace failed units with good ones.
Answers: 1
question
Business, 22.06.2019 19:20
Why is following an unrelated diversification strategy especially advantageous in an emerging economy? a. it allows the conglomerate to overcome institutional weaknesses in emerging economies. b. it allows the conglomerate to form a monopoly in emerging economies. c. it allows the conglomerate to use well-defined legal systems in emerging economies. d. it allows the conglomerate to take advantage of strong capital markets in emerging economies.
Answers: 1
You know the right answer?
Hankins, Inc., is considering a project that will result in initial aftertax cash savings of $6.5 mi...
Questions
question
Mathematics, 31.01.2020 23:58
Questions on the website: 13722363