Our Services

Get 15% Discount on your First Order

[rank_math_breadcrumb]

FIN 3301 Unit VIII

Financial Management

Unit VIII Assignment

This assignment will allow you to demonstrate the following objectives:

· Compute the net present value, profitability index, and internal rate of return for a given company.

· Predict the best choice for a company based on analysis of financial data.

· Compute a company’s WACC using given percentages.

· Calculate the cost of capital of a stock.

· Computer the after-tax cost of capital for bonds.

Instructions: Answer the questions directly on this document. When you are finished, select “Save As,” and save the document using this format: Student ID_UnitVIII. Upload this document to BlackBoard as a .doc, docx, or .rtf file. Show all of your work.

1. The Turnip Company plans to issue preferred stock. Currently, the company’s stock sells for $110. Once new stock is issued, the Turnip Company would receive only $90. The dividend rate is 8%, and the par value of the stock is $100. Compute the cost of capital of the stock to your firm. Show all work.

2. The Maximus Corporation is considering a new investment, which would be financed from debt. Maximus could sell new $1,000 par value bonds at a new price of $920. The bonds would mature in 13 years, and the coupon interest rate is 10%. Compute the after-tax cost of capital to Maximus for bonds, assuming a 34% tax rate. Show work.

3. Connor Corporation is considering two projects (see below). For your analysis, assume these projects are mutually exclusive with a required rate of return of 10%.

Project 1

Project 2

Initial investment

$(465,000)

$(700,000)

Cash inflow Year 1

$510,000

$850,000

Compute the following for each project:

· NPV (net present value)

· PI (profitability index)

· IRR (internal rate of return)

Based on your analysis, answer the following questions :

· Which is the best choice? Why?

· Which project should be selected and why? If the projects had the same IRR amounts but different NPV totals, then how would you know which project to select? Explain.

· What would happen if both projects had negative NPV totals? Which project would you choose? What do negative NPVs indicate? Explain.

· Should we also use the payback method to assist us in project selection? Why or why not? Explain.

4. The capital structure for Magellan Corporation is shown below. Currently, flotation costs are 13% of market value for a new bond issue and $3 per share for preferred stock. The dividends for common stock were $2.50 last year and have an estimated annual growth rate of 6%. Market prices are $1,020 for bonds, $20 for preferred stock, and $30 for common stock. Assume a 34% tax rate.

Financing Type

% of Future

Financing

Bonds (8%, $1k par, 16 year maturity)

36%

Common equity

45%

Preferred stock (5k shares outstanding, $50 par, $1.50 dividend)

19%

Total %

100%

Compute the company’s WACC. Is this WACC considered reasonable given the assumptions and other relevant information? Explain.

Share This Post

Email
WhatsApp
Facebook
Twitter
LinkedIn
Pinterest
Reddit

Order a Similar Paper and get 15% Discount on your First Order

Related Questions

Taxation Questions

    For the taxation year ending December 31, 2023, the income statement of Markham Ltd. was as follows: Revenues $973,000 Expenses: Cost of Goods Sold ($272,000) Selling and Administrative Expenses (132,000) Amortization Expense (156,000) Other Expenses (137,000) (697,000) Income before Income Tax Expense $276,000 Income Tax Expense: Current ($ 97,000)

Taxation Questions

    For the taxation year ending December 31, 2023, the income statement of Markham Ltd. was as follows: Revenues $973,000 Expenses: Cost of Goods Sold ($272,000) Selling and Administrative Expenses (132,000) Amortization Expense (156,000) Other Expenses (137,000) (697,000) Income before Income Tax Expense $276,000 Income Tax Expense: Current ($ 97,000)

Taxation Questions

    For the taxation year ending December 31, 2023, the income statement of Markham Ltd. was as follows: Revenues $973,000 Expenses: Cost of Goods Sold ($272,000) Selling and Administrative Expenses (132,000) Amortization Expense (156,000) Other Expenses (137,000) (697,000) Income before Income Tax Expense $276,000 Income Tax Expense: Current ($ 97,000)

Taxation Questions

    For the taxation year ending December 31, 2023, the income statement of Markham Ltd. was as follows: Revenues $973,000 Expenses: Cost of Goods Sold ($272,000) Selling and Administrative Expenses (132,000) Amortization Expense (156,000) Other Expenses (137,000) (697,000) Income before Income Tax Expense $276,000 Income Tax Expense: Current ($ 97,000)

Taxation Questions

    For the taxation year ending December 31, 2023, the income statement of Markham Ltd. was as follows: Revenues $973,000 Expenses: Cost of Goods Sold ($272,000) Selling and Administrative Expenses (132,000) Amortization Expense (156,000) Other Expenses (137,000) (697,000) Income before Income Tax Expense $276,000 Income Tax Expense: Current ($ 97,000)

Business Question

  “What are the key differences between limited and extended problem-solving approaches in consumer decision-making, and how do these approaches influence purchasing behavior?”

Taxation Questions

    For the taxation year ending December 31, 2023, the income statement of Markham Ltd. was as follows: Revenues $973,000 Expenses: Cost of Goods Sold ($272,000) Selling and Administrative Expenses (132,000) Amortization Expense (156,000) Other Expenses (137,000) (697,000) Income before Income Tax Expense $276,000 Income Tax Expense: Current ($ 97,000)

innovation in business

INNOVATION IN BUSINESS 2024-25 Report and Presentation: your Business Plan You will need to: (1) Develop and submit into Turnitin the Business Plan of YOUR OWN innovation project in a corporation or developing your own start-up in a sector of your choice, following the table of contents indicated below. You

decision analysiss

BBA312 DECISION ANALYSIS Task brief & rubrics Final Assignment Formalities Individual · Minimum length of the assignment 1000 words – Maximum 1500 words. · Essay form · Relate your answers to the concepts delivered in class. · Font: Arial 12,5pts. Line-spacing: default. Text-align: Justified. · Bibliography/References in Harvard style. ·

Project plan

could you make a project plan based on the case attached ? Patient Journey Assessment in the Emergency Department [City Name] is committed to providing healthcare services at primary, secondary, and tertiary levels according to global quality standards for its employees, their families, and other eligible groups. This is achieved

TLMT

SEE ATTACHMENT 250-300 WORDS ANSWERING THE FOLLOWING QUESTION. Each student will reflect on the BP oil spill as it relates to the global supply chain – Examine the use of current transportation economic situations such as the 2010 BP oil spill in the Gulf of Mexico in the internet exercise

Business Question

  How can we effectively implement a detailed yet limited problem-solving approach to address key operational inefficiencies without overextending resources or compromising long-term strategic goals? This question aims to focus on striking a balance between thorough analysis and constrained execution for optimal results.

– Business Plan for Strategizing 1

Class, Telehealth is something that was used a great deal during Covid in order to get patient’s seen for routine visits. One thing that has been an issue in my rural area is that many don’t have good internet service so they were not able to use this service. There

long term financing 1

My cousin is a physician in a neighboring community and he often tells me that he stopped practicing medicine a long time ago. Now the insurances tell them what services they will cover and when they will cover medications. It is no longer the physicians treating the patients, but the

Applied System Analysis (Business Analytics)

Attached Assessment title: AS1 Individual Report (2300 Words) Please read the whole assessment brief before starting work on the Assessment Tasks. The Assessment Tasks You are expected to write a report in MS Doc or Docx format, completing all the following two tasks: Task 1: Quantitative vs Qualitative Analysis Approaches