Weighted Average Cost of Capital Problems_1_-1

Weighted Average Cost of Capital Problems_1_-1 - Borrowing...

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CEVE 322/ENGI 303 Weighted Average Cost of Capital Problems 1. Debt is $3,000,000 at 6% Equity is 7,000,000 at 16% Tax Rate is 35% What is WACC? 2. Debt is $10,000,000 at 7% Preferred Stock is $5,000,000 at 12% Common Equity is $15,000,000 at 20% Tax Rate is 35% What is WACC? 3. Revenues are $10,000,000 per year for 3 years Operating Expenses are $5,000,000 per year for 3 years Tax Rate is 40% Investment is $5,000,000 at time zero, no salvage Interest expense is $200,000 per year
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Unformatted text preview: Borrowing received at time period zero is $2,000,000 Loan is payable in full at end of year 3 Equity capital cost is 20% What is WACC? What is MARR? Is investment acceptable? 4. Revenues are $15,000,000 per year for 2 years No expenses Investment at time period time zero is $10,000,000 Tax rate is 40% Financed 50% debt at 10% and 50% equity at 15% What is WACC? What is MARR? Is project acceptable?...
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This note was uploaded on 03/11/2010 for the course CEVE 322 taught by Professor Segner during the Spring '10 term at Rice.

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