Capital Co. has a capital structure, based on current market values, that consis

Question

Capital Co. has a capital structure, based on current market values, that consists of 39 percent debt, 16 percent preferred stock, and 45 percent common stock. If the returns required by investors are 11 percent, 11 percent, and 16 percent for the debt, preferred stock, and common stock, respectively, what is Capital Capital Co. has a capital structure, based on current market values, that consists of 39 percent debt, 16 percent preferred stock, and 45 percent common stock. If the returns required by investors are 11 percent, 11 percent, and 16 percent for the debt, preferred stock, and common stock, respectively, what is Capital Question 5 Capital Co. has a capital structure, based on current market values, that consists of 39 percent debt, 16 percent preferred stock, and 45 percent common stock. If the returns required by investors are 11 percent, 11 percent, and 16 percent for the debt, preferred stock, and common stock, respectively, what is Capital's after-tax WACC? Assume that the firm's marginal tax rate is 40 percent. (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.) Briarcrest Condiments is a spice-making firm. Recently, it developed a new process for producing spices. The process requires new machinery that would cost $1,728,890. have a life of five years, and would produce the cash flows shown in the following table. What is the NPV if the discount rate is 12.62 percent? (Enter negative amounts using negative sign e.g. -45.25. Round answer to 2 decimal places, e.g. 15.25.) Bell Mountain Vineyards is considering updating its current manual accounting system with a high-end electronic system. While the new accounting system would save the company money, the cost of the system continues to decline. The Bell Mountain's opportunity cost of capital is 10.3 percent, and the costs and values of investments made at different times in the future are as follows: Calculate the NPV of each choice. (Round answers to the nearest whole dollar, e.g. 5,275.) The NPV of each choice is: Suggest when should Bell Mountain buy the new accounting system?

Explanation / Answer

1) After tax WACC 11.53% 2) NPV is $18,405.96 3) YEAR CASH OUTFLOW CASH INFLOW NPV $ 0 5000 7000 2000 1 4,550 7000 2221 2 4,100 7000 2384 3 3,650 7000 2496 4 3,200 7000 2567 5 2,750 7000 2603 Bell Mountain should purchase the system in year 5 `

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