Question

Question 17 (long- Answer/Essay Question - Multiple Chapters, primarily Chopter 13) Use the follaov s.info You are the CFO of Micro Spinoff Inc. The company has 3,000,000 shares of con mon sto outstan ato market price of $50 a share. Micro Spinoff just paid an annual dividend in the amount of $3.12 per stharc The idend wth roatels 5.8 percent annually. Micro Spinoff also has 70,000 bonds outstanding with a f percent of par. The bonds have a 12 percent coupon, pay interest semi-gnnually. and have years has 200,000 shares of preferred stock outstanding at a market price of $116.95 share ferred ocks pay dividend of 10 er que afons 17 to ace value of St Ю per b d that selling at 115372 percent on its par value of $100. The firm is considering a three-year expansion project (same operations as the exis ing projects of the frm) that requires an initial investment in a machine of $200,000. The increase in Net Working Capital (NVWC) at time O is $10,000 that will be reduced to normal levels at the end of the project at time 3. The machine has a life of 4 years and will be depreciated to 0 using straight-line method. The Earnings Before Interest Taxes, Depreciation, and Amortization (EBITDA) in the first year is $70,000 and this will grow at 6 percent a year. At the end of the project (year 3), the machine can belsold for $10,000. The firm's tax ratei 21 percent. Find the cost of common equity? Paragraph this goes with the lang quest iO Solue for the after tax cost of clabt ③ calculat tho weighis of equrlg deb ard pretered StoctK G wat is tho firms weight aueage corf Capital 2 G cuhat is tho Cash-flow at time 07 ⑥ed hat arethe annual cash flaw rom operatios in years y,37 G) Compute after tax saluago ualue in e yoa eat 3 2 3what are tho tiree cash flow ine par 1, and nois i/%, prgeay

Answer 1

d Sock 16-95 d (6。 I-Ve-cro p V- 1153-72 N = 30 2 1 1.9 %

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Page 200-foot 1900a 21o,000

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Date