FNCE 2P91 Study Guide - Final Guide: Capital Market, Weighted Arithmetic Mean, Net Present Value

261 views8 pages

fuchsiamallard838

14 Sep 2020

School

Department

Course

Professor

For unlimited access to Study Guides, a Grade+ subscription is required.

Document Summary

1. judson inc. recently issued new securities to finance a new tv show. The project cost . 1 million, and the company paid ,000 in flotation costs. In addition, the equity issued had a flotation cost of 6. 1% of the amount raised, whereas the debt issued had a flotation cost of 2. 1% of the amount raised. If judson issued new securities in the same proportion as its target capital structure, what is the company"s target debt equity ratio: oblib inc. has a debt-equity ratio of 2, and a weighted average flotation cost of 4%. What is the dollar flotation cost if the company were to raise . 5 million in the capital market: etlaw corporation (rc) manufactures time-series photographic equipment. It is currently at its target debt equity ratio of 0. 89. It"s considering building a new million manufacturing facility. This new plant is expected to generate after-tax cash flows of . 5 million in perpetuity. The company raises all equity from outside financing.

Related Questions

Lorre, Inc., recently issued new securities to finance a new TV show. The project cost $14 million, and the company paid $725,000 in flotation costs. In addition, the equity issued had a flotation cost of 7 percent of the amount raised, whereas the debt issued had a flotation cost of 3 percent of the amount raised. If the company issued new securities in the same proportion as its target capital structure, what is the companys target debtequity ratio?

Suppose your company needs $13 million to build a new assembly line. Your target debtâequity ratio is 0.45. The flotation cost for new equity is 9 percent, but the flotation cost for debt is only 6 percent. Your boss has decided to fund the project by borrowing money because the flotation costs are lower and the needed funds are relatively small.

a.	What is your companyâs weighted average flotation cost, assuming all equity is raised externally? (Round your answer to 2 decimal places. (e.g., 32.16))

Flotation cost

b.	What is the true cost of building the new assembly line after taking flotation costs into account? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567. Do not round intermediate calculations and round your final answer to the nearest whole dollar amount.(e.g., 32)

Amount raised

Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt-equity ratio of 0.66. It's considering building a new $65.6 million manufacturing facility. This new plant is expected to generate aftertax cash flows of $7.81 million in perpetuity. The company raises all equity from outside financing. There are three financing options:

a.	A new issue of common stock: The required return on the company

sapphireyellowjacket197

FNCE 2P91 Study Guide - Final Guide: Capital Market, Weighted Arithmetic Mean, Net Present Value

Document Summary

Get access

Related Documents

FNCE 2P91 Chapter Notes - Chapter 14: Dividend Discount Model, Capital Structure, Capital Asset Pricing Model

RSM333H1 Chapter Notes - Chapter 20: Earnings Yield, Operating Leverage, Retained Earnings

COMMERCE 3FA3 Lecture Notes - Lecture 4: Investment Banking, European Route E80, Cash Flow

Related Questions