The Schenk Company’s currently outstanding bonds have a 13.2 percent coupon and a 6.4 percent yield to maturity.  Schenk believes it could issue new bonds that would provide a similar yield to maturity.  If its marginal tax rate is 45 percent, what is Schenk’s after-tax cost of debt?

A firm with a 10 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$13,000 $5,500 $4,700 $4,000 $5,500 Calculate the project’s profitability index (PI).

Bergeron Microcomputers is considering the following independent projects for the coming year: Project RequiredInvestment ExpectedRate of Return Risk X $2 million 14.5% High Y   4 million 13.5% Average Z   7 million   8.5% Low Bergeron’s WACC is 12 percent, but it adjusts for risk by adding 2 percent to the WACC for high-risk projects and subtracting 2 percent for low-risk projects.  Which project(s) should Bergeron accept assuming it faces no capital constraints?

Li & Associates’ common stock currently trades at $55 a share.  It is expected to pay an annual dividend of $2.75 a share at the end of the year (D1 = $2.75), and the constant growth rate is 8.3 percent a year.  What is the company’s cost of common equity if all of its equity comes from retained earnings?

Braswell & Sons’ common stock currently trades at $70 a share.  It is expected to pay an annual dividend of $4.20 a share at the end of the year (D1 = $4.20), and the constant growth rate is 6.9 percent a year.  What is the company’s cost of common equity if all of its equity comes from retained earnings?

Given the following information on the project’s net operating working capital,  the cash flow of year 2 due to investments in net operating working capital is________? Time        NOWC 0            21.37 1            30.05 2            31.61 3            20.00

Liberty Services is now at the end of the final year of a project. The equipment originally cost $22,500, of which 75% has been depreciated. The firm can sell the used equipment today for $6,000, and its tax rate is 40%. What is the equipment’s after-tax salvage value for use in a capital budgeting analysis? Note that if the equipment’s final market value is less than its book value, the firm will receive a tax credit as a result of the sale.

A firm with a 9.5 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$9,000 $3,500 $3,100 $3,300 $4,200 Calculate the project’s profitability index (PI).

If a firm’s beta is 1.6, the risk-free rate is 4.5%, and the expected return on the market is 8.5%, what will be the firm’s cost of equity using the CAPM approach?

Leslie Industries is considering the following independent projects for the coming year: Project RequiredInvestment ExpectedRate of Return Risk X $8 million 12.0% High Y   4 million 10.0% Average Z   4 million   5.5% Low Leslie’s WACC is 9 percent, but it adjusts for risk by adding 2 percent to the WACC for high-risk projects and subtracting 2 percent for low-risk projects.  Which project(s) should Leslie accept assuming it faces no capital constraints?