Based on No. 11, the cost of retained earnings at IAA is What is the weighted co

Question

Based on No. 11, the cost of retained earnings at IAA is What is the weighted cost of capital for the IAA corporation? It consists of 40% debt, and 60% common. The cost of debt before tax = 9% and the cost of common = 11% The appropriate corporate income tax rate is 33.33%. The D. Dorner farms corporation is considering purchasing one of two fertilizer herbicides for the upcoming year. The more expensive of the two is better and will produce a higher yield. Assume these projects are mutually exclusive and that the required rate of return is 9 percent. Given the following cash flows

Explanation / Answer

Answer no .14

NPV of Project =$242.20

Answer no .15

NPV of Project B = $1505

Answer no . 16

At Internal Rate of Return (IRR), Net Present Value (NPV) of Project = 0 ,

IRR of Project A =75%

Answer no. 17

At Internal Rate of Return (IRR), Net Present Value (NPV) of Project = 0

IRR of Project A =50%

Answer no .18

Net Present value of Project B > Net Present Value of Project A

Hence Project A is selected .

Project A Year Cash Inflow Pvf at 9% Present Value 0 ($400) 1 ($400.00) 1 $700 0.9174312 $642.20 Net Present Value $242.20

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