Question
In: Finance
Watson, Inc., is an all-equity firm. The cost of the company’s equity is currently 12 percent,...
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Watson, Inc., is an all-equity firm. The cost of the company’s equity is currently 12 percent, and the risk-free rate is 4.8 percent. The company is currently considering a project that will cost $11.79 million and last six years. The company uses straight-line depreciation. The project will generate revenues minus expenses each year in the amount of $3.33 million. |
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If the company has a tax rate of 35 percent, what is the net present value of the project? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| Net present value | $ |
Someone previously answered (143,410.90) - this is incorrect.
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Watson, Inc., is an all-equity firm. The cost of the company’s equity is currently 12 percent,...
Watson, Inc., is an all-equity firm. The cost of the company’s
equity is currently 12 percent, and the risk-free rate is 4.8
percent. The company is currently considering a project that will
cost $11.79 million and last six years. The company uses
straight-line depreciation. The project will generate revenues
minus expenses each year in the amount of $3.33 million.
If the company has a tax rate of 35 percent, what is the net
present value of the project? (Enter...
Watson, Inc., is an all-equity firm. The cost of the company’s equity is currently 13 percent,...
Watson, Inc., is an all-equity firm. The cost of the company’s
equity is currently 13 percent, and the risk-free rate is 4.1
percent. The company is currently considering a project that will
cost $11.58 million and last six years. The company uses
straight-line depreciation. The project will generate revenues
minus expenses each year in the amount of $3.26 million.
If the company has a tax rate of 40 percent, what is the net
present value of the project? (Enter...
Watson, Inc., is an all-equity firm. The cost of the company’s equity is currently 13 percent,...
Watson, Inc., is an all-equity firm. The cost of the company’s
equity is currently 13 percent, and the risk-free rate is 4.3
percent. The company is currently considering a project that will
cost $11.64 million and last six years. The company uses
straight-line depreciation. The project will generate revenues
minus expenses each year in the amount of $3.28 million. If the
company has a tax rate of 35 percent, what is the net present value
of the project?
Walker, Inc., is an all-equity firm. The cost of the company’s equity is currently 11.3 percent...
Walker, Inc., is an all-equity firm. The cost of the company’s
equity is currently 11.3 percent and the risk-free rate is 4.2
percent. The company is currently considering a project that will
cost $11.88 million and last six years. The company uses
straight-line depreciation. The project will generate revenues
minus expenses each year in the amount of $3.51 million. If the
company has a tax rate of 21 percent, what is the net present value
of the project? (Do not...
Walker, Inc., is an all-equity firm. The cost of the company’s equity is currently 11.6 percent...
Walker, Inc., is an
all-equity firm. The cost of the company’s equity is currently 11.6
percent and the risk-free rate is 4.5 percent. The company is
currently considering a project that will cost $11.97 million and
last six years. The company uses straight-line depreciation. The
project will generate revenues minus expenses each year in the
amount of $3.57 million.
If the company has a
tax rate of 24 percent, what is the net present value of the
project?
THE ANSWER IS NOT -3,790,792.61 Watson, Inc., is an all-equity firm. The cost of the company’s...
THE ANSWER IS NOT -3,790,792.61
Watson, Inc., is an all-equity firm. The cost of the company’s
equity is currently 13 percent, and the risk-free rate is 4.1
percent. The company is currently considering a project that will
cost $11.58 million and last six years. The company uses
straight-line depreciation. The project will generate revenues
minus expenses each year in the amount of $3.26 million.
If the company has a tax rate of 40 percent, what is the net
present...
Windsor, Inc. is currently an all-equity financed firm, and its cost of equity is 12%. It...
Windsor, Inc. is currently an all-equity financed firm, and its
cost of equity is 12%. It has 20,000 shares outstanding that sell
for $25 each. The firm contemplates a restructuring that would
borrow $100,000 in perpetual debt at an interest rate of 8% which
will be used to repurchase stock. Assume that the corporate tax
rate is 35%.
(1) Calculate the present value of the interest tax shields and
the value of the firm after the proposed restructuring.
(2) What...
Windsor, Inc. is currently an all-equity financed firm, and its cost of equity is 12%. It has...
Windsor, Inc. is currently an all-equity financed firm, and its
cost of equity is 12%. It has 20,000 shares outstanding
that sell for $25 each. The firm contemplates a restructuring that
would borrow $100,000 in perpetual debt at an interest rate of 8%
which will be used to repurchase stock. Assume that the corporate
tax rate is 35%.
(1) Calculate the present value of the interest tax shields and
the value of the firm after the proposed restructuring.
(2) What will...
Question #3. Windsor, Inc. is currently an all-equity financed firm, and its cost of equity is...
Question #3.
Windsor, Inc. is currently an all-equity financed firm, and its
cost of equity is 12%. It has 20,000 shares outstanding that sell
for $25 each. The firm contemplates a restructuring that would
borrow $100,000 in perpetual debt at an interest rate of 8% which
will be used to repurchase stock. Assume that the corporate tax
rate is 35%.
(1) Calculate the present value of the interest tax shields and
the value of the firm after the proposed restructuring....
Hardmon Enterprises is currently an all-equity firm with an expected return of 12 %12%. It is...
Hardmon Enterprises is currently an all-equity firm with an
expected return of
12 %12%.
It is considering a leveraged recapitalization in which it would
borrow and repurchase existing shares. Assume perfect capital
markets.
a. Suppose Hardmon borrows to the point that
its debt-equity ratio is 0.50. With this amount of debt, the debt
cost of capital is
4 %4%.
What will the expected return of equity be after this
transaction?
b. Suppose instead Hardmon borrows to the point
that its...
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