Company A is opening a new branch in Charlotte today. Their unlevered cost of equity is...

Company A is opening a new branch in Charlotte today. Their unlevered cost of equity is 14%, and their cost of debt is 5%. Their debt to equity ratio is 1.1, and their tax rate is 26%. Initial costs are $1.5M. The firm expects EBIT of $1M one year from today, $500,000 two years from today, and $200,000 three years from today, after which they expect to shut down. They will finance some of their startup costs by borrowing $400,000 at their cost of debt, to be repaid three years from today.

What is Eyesore’s levered cost of equity?

What is the NPV of this project using the FTE method?

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jeff jeffy answered 1 year ago

West Wells is considering opening a new branch. The company expects the new branch’s EBIT to...

West Wells is considering opening a new branch. The company expects the new branch’s EBIT to be $10 million per year. At this time, the company is considering the following two financing plans: Plan 1: Equity financing. Under this plan, 3 million common shares will be sold at $12 each. Plan 2: Debt-equity financing. Under this plan, $20 million of 12 percent long-term debt and 1.6 million common shares at $10 each will be sold. Use a 40 percent marginal...

Dunder-Mifflin is considering opening a new branch in Columbia with an initial fixed asset cost of...

Dunder-Mifflin is considering opening a new branch in Columbia with an initial fixed asset cost of $3.66 million which will be depreciated straight-line to a zero book value over the 10-year life of the project. At the end of the project the equipment will be sold for an estimated $300,000. The project will not directly produce any sales but will reduce operating costs by $725,000 a year. The tax rate is 21 percent. The project will require $45,000 of inventory...

An unlevered company with a cost of equity of 11% generates $8 million in earnings before...

An unlevered company with a cost of equity of 11% generates $8 million in earnings before interest and taxes (EBIT) each year. The decides to alter its capital structure to include debt by adding $4 million in debt with a pre-tax cost of 7% to its capital structure and using the proceeds to reduce equity by a like amount as to keep total invested capital unchanged. The firm pays a tax rate of 35%. Assuming that the company's EBIT stream...

An unlevered company with a cost of equity of 12% generates $7 million in earnings before...

An unlevered company with a cost of equity of 12% generates $7 million in earnings before interest and taxes (EBIT) each year. The decides to alter its capital structure to include debt by adding $1 million in debt with a pre-tax cost of 6% to its capital structure and using the proceeds to reduce equity by a like amount as to keep total invested capital unchanged. The firm pays a tax rate of 26%. Assuming that the company's EBIT stream...

An unlevered company with a cost of equity of 15% generates $7 million in earnings before...

An unlevered company with a cost of equity of 15% generates $7 million in earnings before interest and taxes (EBIT) each year. The decides to alter its capital structure to include debt by adding $2 million in debt with a pre-tax cost of 8% to its capital structure and using the proceeds to reduce equity by a like amount as to keep total invested capital unchanged. The firm pays a tax rate of 39%. Assuming that the company's EBIT stream...

Company ABC is currently unlevered. It uses CAPM to estimate the cost of common equity, and...

Company ABC is currently unlevered. It uses CAPM to estimate the cost of common equity, and at the time of the analysis the risk-free rate is 5%, the market risk premium is 6% and the company's tax rate is 34%. It estimates that its beta now (which is unlevered because it currently has no debt) is .93 further, over the next two years, the companys Capital budgeting needs and and NI are as follows: YEAR Capital budgeting needs Net Income...

Waterdeep Adventure Travel has an unlevered cost of equity of13.4%, and a cost of debt...

Waterdeep Adventure Travel has an unlevered cost of equity of 13.4%, and a cost of debt of 7.8%. Their tax rate is 22%, and they maintain a capital structure of 33% debt and the rest equity. They are considering giving cave exploration tours to their menu of adventure vacations. Buying the needed equipment would cost $72,317, and would bring in $28,952 one year from today, and $81,488 two years from today. What is the NPV of this project, using the...

Waterdeep Adventure Travel has an unlevered cost of equity of 11.2%, and a cost of debt...

Waterdeep Adventure Travel has an unlevered cost of equity of 11.2%, and a cost of debt of 6.9%. Their tax rate is 35%, and they maintain a capital structure of 39% debt and the rest equity. They are considering giving cave exploration tours to their menu of adventure vacations. Buying the needed equipment would cost $68,080, and would bring in $38,285 one year from today, and $84,455 two years from today. What is the NPV of this project, using the...

Waterdeep Adventure Travel has an unlevered cost of equity of 19.5%, and a cost of debt...

Waterdeep Adventure Travel has an unlevered cost of equity of 19.5%, and a cost of debt of 6.1%. Their tax rate is 36%, and they maintain a capital structure of 58% debt and the rest equity. They are considering giving cave exploration tours to their menu of adventure vacations. Buying the needed equipment would cost $50,902, and would bring in $34,127 one year from today, and $86,583 two years from today. What is the NPV of this project, using the...

1.Following are costs incurred in the past year involved with the opening of a new branch...

1.Following are costs incurred in the past year involved with the opening of a new branch in a company. Use the following information to calculate the total amount that was debited to the land account. Description Amount Fee for Title 300 Architect Fee 3,100 Cash paid for land and old building 80,000 Remova lof building 7,000 Salavage Value of Building Removed 1,000 Purchased machinery 10,000 New building constructed 500,000 Assessment by city for building permit 600 Installation on machinery 1,500...

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