2009-04-04_170130_Copy_of_MGT_325_Module_5_Spreadsheet_Exam-1(1)

2009-04-04_170130_Copy_of_MGT_325_Module_5_Spreadsheet_Exam-1(1)

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PROBLEM FOR CHAPTERS TEN AND ELEVEN Saint Leo Manufacturing is going to introduce a new product line and to accomplish this it has four projects analyzed in which it wants to invest a total of $100 mil ion.  Your job is to  find what it wil  cost to raise this amount of capital and based on the cost of capital determine which of the projects should be accepted by the firm to invest in. PROJECTS A B C D INVESTMENT  $30,000,000   $20,000,000   $25,000,000   $25,000,000  EXPECTED RETURN 10.00% 14.00% 11.50% 16.00% The firms capital structure consists of: FMV CAPITAL PERCENTAGE AMOUNT DEBT 30%  $15,000,000  PREFERRED STOCK 10%  $5,000,000  COMMON STOCK 60%  $30,000,000   $50,000,000  Other information about the firm: CORPORATE TAX RATE 35% DEBT CURRENT PRICE  $900.00  ANNUAL INTEREST 9.00%  CURRENT INTERST PAID SEMIANNUALLY  ORIGINAL MATURITY 25 YEARS, BUT NOW 20 YEARS LEFT MATURITY VALUE  $1,000.00  FLOTATION COST INSIGNIFICANT MARKET YIELD PROJECTED:    UP TO $20 MILLION 9%    ABOVE $20 MILLION 12% 3 % additional premium PREFERRED CURRENT PRICE  $50.00   $5.00  FIXED AT 10% OF PAR FLOTATION COST  $2.00   $5.00  COMMON CURRENT PRICE  $33.00   $1.50  RETAINED EARNINGS  $16,000,000  GROWTH RATE (g) 9% FLOTATION COST
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This note was uploaded on 11/21/2011 for the course MGT-325 CL03 taught by Professor Maddron during the Spring '11 term at St. Leo.

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