Question
In: Finance
Your corporation is considering investing in a new product line. The annual revenues (sales) for the...
Your corporation is considering investing in a new product line. The annual revenues (sales) for the new product line are expected to be $356,811.00 with variable costs equal to 50% of these sales. In addition annual fixed costs associated with this new product line are expected to be $59,415.00 . The old equipment currently has no market value. The new equipment cost $74,013.00 . The new equipment will be depreciated to zero using straight-line depreciation for the three-year life of the project. At the end of the project the equipment is expected to have a salvage value of $20,582.00 . An increase in net working capital of $68,592.00 is also required for the life of the project. The corporation has a beta of 1.439 , a tax rate of 26.31% , and a target capital structure consisting of 41.01% equity and 58.99% debt. Treasury securities have a yield of 3.58% and the expected return on the market is 12.10% . In addition, the company currently has outstanding bonds that have a yield to maturity of 4.69%.
What is the corporations cost of equity?
What is the WACC?
What is the NPV for this project?
Solutions
Expert Solution
SEE THE IMAGE. ANY DOUBTS,
FEEL FREE TO ASK. THUMBS UP PLEASE
jeff jeffy answered 1 year agoRelated Solutions
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variable costs equal to 50% of these sales. In addition
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expected to be $45,786.00 . The old equipment
currently has no market value. The new equipment
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depreciated to zero using straight-line depreciation for the
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project if the cost of capital is 12%? (Show your work. Label $. No
decimal places required. Highlight or bold...
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