Problem 14.16 – Finding the WACC
Fundamentals of Corporate Finance
Ross, Westerfield, and Jordan
13th Edition
Find the firm’s market value capital structure what discount rate the firm should use.
Find the firm’s market value capital structure what discount rate the firm should use.
Find what projects have a higher expected return, what projects should be accepted, and what projects would be incorrectly accepted or rejected?
Find the company’s weighted average flotation cost, and the true cost of building the new assembly line.
Find the true initial cost figure the company should use.
Find the maximum initial cost .
Find the company’s target debt-equity ratio.
Find the cost of equity with the DCF and SML method.
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.
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.