AnhNguyenFI515Week5Lab

AnhNguyenFI515Week5Lab - 101 rd 13 0 Tax rate After tax...

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10-1 13% 13% 13% Tax rate 0% 20% 35% After tax cost of debt = (1-Tax rate) x After tax co 100% x 13% 13.0% 10.7 WACC= (wd)(rd(1-T) + (wps)(rps)+ (wce)(rs) 30% 6.0% tax rate = 40% 5% 5.8% WACC = 65% 12.0% 10-8 40% Debt; 60% Equity; rd = 9%; T = 40%; WACC = 9.96%; rs = ? WACC = (wd)(rd)(1 - T) + (wce)(rs) 40% 9.0% tax rate = 40% 60% ? WACC = 9.96% rs = (9.96%- (0.4)(9%)(1 - 0.4))/(0.6)) 0.13 13% 10-9 N= 30x2 = 60 30 PMNT= 6%x1000: 2 = 30 60 FV = 1000 1000 PV = -515.16 -515.16 Tax rate= 40% I (semi interest rate)= 6% R (Nominal rate)= 12% e after-tax component Cost of dept  7.2% r d (r d) A-T r d = A-T r d = w d = r d = w p = r p = w s = r s = w d = r d = w s = r s =

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ost of debt = (1-Tax rate) x After tax cost of debt = (1-Tax rate) x 80% x 13% 65% x 10.4% 8.45% 9.17% = (0.4)(9%)(1 - 0.4) + (0.6)rs (r d) A-T r d = A-T r d = A-T r d = A-T r d =
13% (r d)

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11-9 Expected after-tax Year (t) Project E Project G 0 (\$22,000) (\$17,500) 1 6,290 5,000 2 6,290 5,000 3 6,290 5,000 4 6,290 5,000 5 6,290 5,000 6 6,290 5,000 Panel A: Project Cash Flows and Cost of Capital Project S: 0 1 2 3 4 5 6 | | | | | | | -\$22,000 \$6,290 \$6,290 \$6,290 \$6,290 \$6,290 \$6,290 Project L: 0 1 2 3 4 5 6 | | | | | | | -\$17,500 \$5,000 \$5,000 \$5,000 \$5,000 \$5,000 \$5,000 Project cost of capital = r = 12% Panel B: Summary of Selected Evaluation Criterion Project E F NPV: \$3,861 \$3,057 IRR: 18.0% 18.0%
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