The financial staff of cairn communications has identified

FIN 650 GCU Campbell Co Adding Robotic Paint Sprayer to Its Production Line Case Study
Subject
Business Finance

Course
FIN 650

School
Grand Canyon University

Department
FIN

Question Description
1. LL Incorporated's currently outstanding 11% coupon bonds have a yield to maturity of 8.4%. LL believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 25%, what is LL's after-tax cost of debt? Round your answer to two decimal places.

2. Summerdahl Resort's common stock is currently trading at $24 a share. The stock is expected to pay a dividend of $1.75 a share at the end of the year (D1 = $1.75), and the dividend is expected to grow at a constant rate of 7% a year. What is the cost of common equity? Round your answer to two decimal places.

3. Booher Book Stores has a beta of 1.2. The yield on a 3-month T-bill is 4% and the yield on a 10-year T-bond is 8%. The market risk premium is 4.5%, and the return on an average stock in the market last year was 13%. What is the estimated cost of common equity using the CAPM? Round your answer to two decimal places.

4. David Ortiz Motors has a target capital structure of 40% debt and 60% equity. The yield to maturity on the company's outstanding bonds is 12%, and the company's tax rate is 25%. Ortiz's CFO has calculated the company's WACC as 13.2%. What is the company's cost of equity capital? Round your answer to the nearest whole number

5. A project has an initial cost of $40,000, expected net cash inflows of $10,000 per year for 7 years, and a cost of capital of 11%. What is the project's NPV? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to the nearest cent.

6. A project has an initial cost of $60,000, expected net cash inflows of $14,000 per year for 9 years, and a cost of capital of 9%. What is the project's IRR? Round your answer to two decimal places.

7. A project has an initial cost of $70,000, expected net cash inflows of $11,000 per year for 11 years, and a cost of capital of 9%. What is the project's MIRR? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to two decimal places.

8. A project has an initial cost of $35,000, expected net cash inflows of $13,000 per year for 8 years, and a cost of capital of 14%. What is the project's PI? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to two decimal places.

9. A project has an initial cost of $40,000, expected net cash inflows of $10,000 per year for 7 years, and a cost of capital of 13%. What is the project's payback period? Round your answer to two decimal places.

10. A project has an initial cost of $52,125, expected net cash inflows of $12,000 per year for 7 years, and a cost of capital of 12%. What is the project's discounted payback period? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to two decimal places.