Problem 14.23 – Calculating the Cost of Equity
Fundamentals of Corporate Finance
Ross, Westerfield, and Jordan
13th Edition
Find the cost of equity with the DCF and SML method.
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Find the cost of equity with the DCF and SML method.
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What is the NPV of the manufacturing facility used to produce photographic equipment? You are given a debt-equity ratio, the cost of the new plant, the after-tax cash flows, and three financing options.
Your numbers will vary.
Defense Electronics, Inc. needs to evaluate a manufacturing plant to produce a new line of RDSs. Given market data on DEI’s securities including its Debt, Common Stock, Preferred stock, and the Market, along with the underwriter’s fees (spreads), determine the initial cash flow, the discount rate adjusted for increased riskiness, the aftertax salvage value of the plant when sold, the annual operating cash flow, the accounting break-even quantity of RDSs and finally, the project’s NPV and IRR.
Your numbers will vary.