Need help with attached assignment.  Thanks so much! hmw_5_1.docx

This preview shows page 1 - 9 out of 72 pages.

Need help with attached assignment. Thanks so much! hmw_5_11-24_-26.docx 11. value: 1.00 points Speedy Delivery Systems can buy a piece of equipment that is anticipated to provide a return of 11 percent and can be financed at 8 percent with debt. Later in the year, the firm turns down an opportunity to buy a new machine that would yield a return of 18 percent but would cost 20 percent to finance through common equity. Assume debt and common equity each represent 50 percent of the firm’s capital structure.
a. Compute the weighted average cost of capital. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
Which project(s) should be accepted?
Piece of equipment 12. value: 1.00 points A brilliant young scientist is killed in a plane crash. It is anticipated that he could have earned $310,000 a year for the next 30 years. The attorney for the plaintiff’s estate argues that the lost income should be discounted back to the present at 4 percent. The lawyer for the defendant’s insurance company argues for a discount rate of 9 percent. What is the difference between the present value of the settlement at 4 percent and 9 percent? Compute each one
separately. Use Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Difference $ 13. value: 1.00 points The Goodsmith Charitable Foundation, which is tax- exempt, issued debt last year at 13 percent to help finance a
new playground facility in Los Angeles. This year the cost of debt is 20 percent higher; that is, firms that paid 15 percent for debt last year will be paying 18.00 percent this year. a. If the Goodsmith Charitable Foundation borrowed money this year, what would the aftertax cost of debt be, based on their cost last year and the 20 percent increase? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Aftertax cost of debt % b.
If the receipts of the foundation were found to be taxable by the IRS (at a rate of 20 percent because of involvement in political activities), what would the aftertax cost of debt be? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture