McCann Catching, Inc. has 2.00 million shares of stock outstanding. The stock currently sells for $12.80...

McCann Catching, Inc. has 2.00 million shares of stock outstanding. The stock currently sells for $12.80 per share. The firm’s debt is publicly traded and was recently quoted at 88.00% of face value. It has a total face value of $14.00 million, and it is currently priced to yield 10.00%. The risk free rate is 4.00% and the market risk premium is 8.00%. You’ve estimated that the firm has a beta of 1.30. The corporate tax rate is 39.00%. The firm is considering a $48.08 million expansion of their production facility. The project has the same risk as the firm overall and will earn $11.00 million per year for 8.00 years.

What is the NPV of the expansion? (answer in terms of millions, so 1,000,000 would be 1.0000)

Solutions

Expert Solution

The following is the Excel Worksheet of the calculation of NPV of Expansion:-

Here,

Cash Flow = $11 Million per year

r = 11.70%

Initial investment = $48.08 Million

The following is the formula sheet of above Excel Worksheet for better understanding:-

NPV of Expansion = $7.141586 Million

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

McCann Catching, Inc. has 2.00 million shares of stock outstanding. The stock currently sells for $12.98...

McCann Catching, Inc. has 2.00 million shares of stock outstanding. The stock currently sells for $12.98 per share. The firm’s debt is publicly traded and was recently quoted at 89.00% of face value. It has a total face value of $16.00 million, and it is currently priced to yield 8.00%. The risk free rate is 2.00% and the market risk premium is 8.00%. You’ve estimated that the firm has a beta of 1.18. The corporate tax rate is 38.00%. The...

McCann Catching, Inc. has 3.00 million shares of stock outstanding. The stock currently sells for $12.75...

McCann Catching, Inc. has 3.00 million shares of stock outstanding. The stock currently sells for $12.75 per share. The firm’s debt is publicly traded and was recently quoted at 90.00% of face value. It has a total face value of $12.00 million, and it is currently priced to yield 8.00%. The risk free rate is 4.00% and the market risk premium is 8.00%. You’ve estimated that the firm has a beta of 1.37. The corporate tax rate is 34.00%. The...

McCann Catching, Inc. has 3.00 million shares of stock outstanding. The stock currently sells for $12.83...

McCann Catching, Inc. has 3.00 million shares of stock outstanding. The stock currently sells for $12.83 per share. The firm’s debt is publicly traded and was recently quoted at 90.00% of face value. It has a total face value of $19.00 million, and it is currently priced to yield 10.00%. The risk free rate is 4.00% and the market risk premium is 8.00%. You’ve estimated that the firm has a beta of 1.19. The corporate tax rate is 34.00%. The...

McCann Catching, Inc. has 2.00 milion shares of stock outstanding. The stock currently sells for $12.64 per share

McCann Catching, Inc. has 2.00 milion shares of stock outstanding. The stock currently sells for $12.64 per share. The firm's debt is publicly traded and was recently quoted at 91.00% of face value. It has a total face value of $17.00million , and it is currently priced to yield 9.00%. The risk free rate is 3.00% and the market risk premium is 8.00%. You've estimated that the firm has a beta of 1.29. The corporate tax rate is 38.00%.The firm...

Market Enterprises, Inc. has 1.0 million shares of stock outstanding. The stock currently sells for $25...

Market Enterprises, Inc. has 1.0 million shares of stock outstanding. The stock currently sells for $25 per share. The firm’s debt is publicly traded, and its market value was recently quoted at 102% of face value. It has a total face value of $7 million, and it is currently priced to yield 7 percent. The risk-free rate is 6%, and the market risk premium is 7%. You’ve estimated that Market Enterprises has a beta of .95. If the corporate tax...

Young Corporation stock currently sells for $40 per share. There are 1 million shares currently outstanding....

Young Corporation stock currently sells for $40 per share. There are 1 million shares currently outstanding. The company announces plans to raise $5 million by offering shares to the public at a price of $40 per share. Q: If the under writing spread is 6% and the other administrative costs are $60,000, what is the dollar value of the total direct costs of the issue? (Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your...

Fairyland Inc. has 4 million shares of common stock outstanding, 1 million shares of preferred stock...

Fairyland Inc. has 4 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 200 thousand bonds. The common shares are selling for $25 per share, the preferred share are selling for $10 per share, and the bonds are selling for 95 percent of their $1,000 par. (See P10-3 for formula to calculate weights). A. What would be the weight used for equity in the computation of FarCry’s WACC? B. What weight should you use for...

A company has $119 million in outstanding bonds, and 10 million shares of stock currently trading...

A company has $119 million in outstanding bonds, and 10 million shares of stock currently trading at $39 per share.The bonds pay an annual coupon rate of 6% and is trading at par. The company's beta is 0.9, its tax rate is 40%, the risk-free rate is 4%, and the market risk premium is 5%. What is this firm's WACC?

A company has $105 million in outstanding bonds, and 10 million shares of stock currently trading...

A company has $105 million in outstanding bonds, and 10 million shares of stock currently trading at $36 per share.The bonds pay an annual coupon rate of 9% and is trading at par. The company's beta is 0.8, its tax rate is 40%, the risk-free rate is 2%, and the market risk premium is 6%. What is this firm's WACC?

A company has $107 million in outstanding bonds, and 10 million shares of stock currently trading...

A company has $107 million in outstanding bonds, and 10 million shares of stock currently trading at $40 per share.The bonds pay an annual coupon rate of 5% and is trading at par. The company's beta is 1.2, its tax rate is 40%, the risk-free rate is 3%, and the market risk premium is 4%. What is this firm's WACC?

Subjects