You are given the task of calculating the cost of capital of N Corp. The company faces a tax rate of 40%. The company has 200,000 common shares and 50,000 preferred shares outstanding. Each preferred share has a par value of $50, and is currently priced at 90% of the par value. The preferred shares are paying dividends that total 5% of the par value. You estimate that the beta of the common stock is 1.5. The equity market risk premium is estimated to be 5%, and the risk-free rate is 5%. The company has just paid a dividend of $2 per share. You expect that the dividends will grow at a rate of 15% until Year 4. After Year 4, the dividends are expected to grow at a constant rate of 5% forever. You decide to employ the CAPM approach to calculate the cost of equity.

The company has two different debt issues that are outstanding. The first issue consists of 1,000 semi-annual coupon bonds. Each bond has a face value of $3,000. The annual coupon rate is 12%, and the bonds are currently trading at a YTM that equals 12%. The bonds will mature 10 years from now. The second issue consists of 1,000 zero coupon bonds. Each bond has a face value of $1,000, and will mature 15 years from now. The zero-coupon bonds are trading at 50% of their face value.  

Calculate the weighted average cost of capital

A project has an initial cost of $1,000,000 and is expected to last for 2 years. In year 1, depreciation charge will be $100,000 and earnings are expected to be $164,747. In year 2, depreciation will be $100,000 and earnings are expected to be $208,905. Assume the required return is 8%. What is the value of this project?

The cost of equipment purchased by Charleston, Inc., on June 1, 2014, is $201,140. It is estimated that the machine will have a $11,300 salvage value at the end of its service life. Its service life is estimated at 7 years, its total working hours are estimated at 94,920, and its total production is estimated at 1,186,500 units. During 2014, the machine was operated 13,560 hours and produced 124,300 units. During 2015, the machine was operated 12,430 hours and produced 108,480 units. Compute depreciation expense on the machine for the year ending December 31, 2014, and the year ending December 31, 2015, using the following methods. (Round answers to 0 decimal places, e.g. 45,892.) 2014 2015 (a) Straight-line $ $ (b) Units-of-output $ $ (c) Working hours $ $ (d) Sum-of-the-years'-digits $ $ (e) Double-declining-balance (twice the straight-line rate) $

Suppose the expected sales volume of a company is $30,000,000, if the salary and administration cost of the company sales force equals to $700,000 and they receive a commission of 2.5%, while the commission for the independent sales force equals 5%, should the company hire independent sales force or use internal sales force?

Kolby’s Korndogs is looking at a new sausage system with an installed cost of $514,000. This cost will be depreciated straight-line to zero over the project’s four-year life, at the end of which the sausage system can be scrapped for $102,000. The sausage system will save the firm $190,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $48,000. PLEASE SHOW WORK WITHOUT EXCEL
  
What is the aftertax salvage value of the equipment? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Aftertax salvage value            $

What is the annual operating cash flow? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
OCF            $

If the tax rate is 40 percent and the discount rate is 9 percent, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
  
NPV            $

The mean cost of a five pound bag of shrimp is 42 dollars with a variance of 49. If a sample of 54 bags of shrimp is randomly selected, what is the probability that the sample mean would differ from the true mean by more than 1.4 dollars? Round your answer to four decimal places.

The table below shows the average cost of a firm depending on the level of production.

Assuming that the company is operating in the long run what are fixed costs?

4.5 If the total capital cost of the Section 4.6 plant design is $600,000,000 and the annual administrative and maintenance costs are one cent per kW-hr, what is the minimum cost of electricity per kW-hr, assuming an annual interest rate of 9% and an expected plant lifetime of thirty-five years?

4.24 Upon hiring on with Hot Stuff Engineering Company after graduation, you purchase a $30,000 automobile to establish an image as a prosperous engineer. You pay no money down, but 1% interest per month, compounded monthly, for four years. What are your monthly payments? What will your payments be if you are paying simple interest?

Tamarisk Co. is building a new hockey arena at a cost of $2,690,000. It received a downpayment of $550,000 from local businesses to support the project, and now needs to borrow $2,140,000 to complete the project. It therefore decides to issue $2,140,000 of 12%, 10-year bonds. These bonds were issued on January 1, 2016, and pay interest annually on each January 1. The bonds yield 11%.

1. Prepare the journal entry to record the issuance of the bonds on January 1, 2016.

2. Prepare a bond amortization schedule up to and including January 1, 2020, using the effective interest method.

3. Assume that on July 1, 2019, Tamarisk Co. redeems half of the bonds at a cost of $1,173,900 plus accrued interest. Prepare the journal entry to record this redemption.