Given the following annual net cash flows determine the internal rate of return to the nearest whole percent of a project with an initial outlay of $750,000.
Yr. 1 500,000
Yr.2 150,000
Yr.3 250,00
a) 9% b) 11% C) 13% d) 15%
Given the following information on S & G inc.s capital structure, compute the company’s weighted average cost of capital? Company marginal tax rate is 40%?
Percent of Capital Before-Tax component
Structure cost
Bonds 40% 7.5%
Preferred Stocks 5% 11%
Common Stock (Internal Only) 55% 15%
a) 13.3% b) 7.1% c) 10.6% d) 10%
Kelly Corp. will issue new common stock to finance an expansion. The existing common stock just paid a $1.50 dividend, and dividends are expected to grow at a constant rate 8% indefinitely. The stock sells for $45, and flotation expenses of 5% of the selling price will be incurred on new shares. What is the cost of new common stock be for kelly Corp.?
a) 11.33% b) 11.51% c) 11.60% d) 11.79% e) 12.53%
A company has preffered stockk that can be sold for $21 per share . The preferred stock pays an annual dividend of 3.5% base on a par value of $100. Flotation costs assoc with sale of preferred stock equal $1.25 per share. The company marginal tax rate is 35%. The cost of pere stock is
a) 18.87& b) 17.72% c) 14.26% d) 12.94%
Zellars, Inc. Is considering two mutually exclusive projects, A and B. Project A costs $95,000 and is expected to generate $65,000 year one and $75,000 in year two. Project B cost $120,000 and is expected to generate $64,000 in year one, $67,000 year 2, $56,000 year 3 and $45,000 year 4. Zellars, required rate of return for these projects is 10%. The internal rate of return for Project a is