Texts: QUESTION 1 (REFERENCE)
ABC Inc.'s capital structure is 40% debt, 30% preferred, and 30% common equity, and its tax rate is 35%. For financing,
(a) ABC sold a non-callable bond several years ago that now has 15 years to maturity with an 8% annual coupon, paid semiannually, at a price of $1,055, and a par value of $1,000.
(b) ABC sold perpetual preferred stock for $95.50 per share, with a $7.50 annual dividend and a flotation cost of 3.00% of the price.
(c) ABC also has beta = 1.2, risk-free rate of return rRF = 6.00%; market risk premium RPM = 7.00%. The question is: What is the company's WACC? (MY ANSWER WAS 8.67, I AM NOT SURE IF IT'S CORRECT)
QUESTION 2
ABC is considering a project that has the following cash flow and WACC data. (a) What is the project's NPV? (b) What is the project's IRR? (c) What is the project’s MIRR? (d) Should the project be accepted? Why? WACC: The result of (1) above
YEAR
CASH FLOW
0
$-1,200
1
$420
2
$380
3
$360
4
$340
5
$320
YOU ONLY NEED TO ANSWER QUESTION 2! QUESTION 1 IS FOR THE REFERENCE. I WILL UPVOTE!