MGFC10mt_Sum2013_Solution.pdf - ANSWER 1 a Common Equity Market Value = S = 10,000,000 x $30 = $300,000,000 rs r f s rm r f = 2 1.4(6 =10.4 Debt Market

MGFC10mt_Sum2013_Solution.pdf - ANSWER 1 a Common Equity...

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ANSWER 1: a. Common Equity Market Value = S = 10,000,000 x $30 = $300,000,000 2 f m s f s r r r r = 2% + 1.4(6%) =10.4% Debt Market Value = B = 100,000 x $1000 = $100,000,000 4 7% B r Preferred Stock 2 Market Value = P = 2,000,000 x $50 = $100,000,000 p r 3/50 = 0.06 = 6% V = S + B + P = $300,000,000 + 100,000,000 + 100,000,000 = $500,000,000 1 3 0.6 5 S V 1 0.20 5 B V 1 0.20 5 P V 1 V P r V B T r V S r r P c B S WACC ) 1 ( 2 = 0.104(0.60) + 0.07(1-0.4)(0.20) + 0.06(0.20) = 0.0828 b. 13 1 1 1 Pr 1 1 1 1 Recov 1 1 t wacc c wacc t wacc c t t wacc wacc wacc r NPV Land Plant NWC ice VariableCost Volume FixedCost T r r Plant SalvageValueofLand TaxOnCapitalGain eryOfNWC T t r r r   25 25 25 1 1 1.0828 $10,000,000 30,000,000 10,000,000 2000 1000 30,000 20,000,000 1 0.4 0.0828 1 1 1.0828 $30,000,000 30,000,000 (30,000,000 10,000,000)0.5(0.4) 0.4 25 0.0828 1.0828 NPV  
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  • Fall '16
  • SyedAhmed
  • Debt, $2, $50, $390

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