Question

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Garnet, Inc., has a target debt-equity ratio of 0.63. Its WACC is 11.8 %, and the tax rate is 31% If you know that the after-tax cost of debt is 6%, what is the cost of equity? (Report answer in percentage terms and round to 2 decimal places. Do not round intermediate calculations). Question 8 Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $332,090 per year. You believe the technology used in the machine has a 10-year life; in other words, no matter when you purchase the machine, it will be obsolete 10 years from today. The machine is currently priced at $1,760,000. The cost of the machine will decline by $110,000 per year until it reaches $1,320,000, where it will remain. The required return is 17% What is the NPV if the company purchases the machine today? (Round answer to 2 decimal places. Do not round intermediate calculations)

Answer 1

1.
=(11.8%-0.63/1.63*6%*(1-31%))/(1/1.63)=0.166258

2.
=-1760000+332090/17%*(1-1/1.17^10)=-212924.321265981