1. The Bet-r-Bilt Company has a 5-year bond outstanding with a 4.00 percent coupon. Interest payments are paid semi-annually. The face amount of the bond is $1,000. This bond is currently selling for 96 percent of its face value. What is the company's pre-tax cost of debt?
8.0 percent
4.0 percent
4.9 percent
2.4 percent
9.6 percent
2. Antonio's is analyzing a project with an initial cost of $37,000 and cash inflows of $25,000 a year for 2 years. This project is an extension of the firm's current operations and thus is equally as risky as the current firm. The firm uses only debt and common stock to finance their operations and maintains a debt-equity ratio of 0.6. The pre-tax cost of debt is 7.4 percent and the cost of equity is 11.2 percent. The tax rate is 34 percent. What is the projected net present value of this project?
$11,829.32
$3,072.67
$7,078.50
$4,671.81
$34,792.13
| 1. The Bet-r-Bilt Company has a 5-year bond outstanding with a 4.00 percent coupon. Interest payments are paid semi-annually. The face amount of the bond is $1,000. This bond is currently selling for 96 percent of its face value. What is the company's pre-tax cost of debt? |
8.0 percent
4.0 percent
4.9 percent
2.4 percent
9.6 percent
| 2. Antonio's is analyzing a project with an initial cost of $37,000 and cash inflows of $25,000 a year for 2 years. This project is an extension of the firm's current operations and thus is equally as risky as the current firm. The firm uses only debt and common stock to finance their operations and maintains a debt-equity ratio of 0.6. The pre-tax cost of debt is 7.4 percent and the cost of equity is 11.2 percent. The tax rate is 34 percent. What is the projected net present value of this project? |
$11,829.32
$3,072.67
$7,078.50
$4,671.81
$34,792.13
Related questions
| Antonio's is analyzing a project with an initial cost of $32,000 and cash inflows of $27,000 a year for 2 years. This project is an extension of the firm's current operations and thus is equally as risky as the current firm. The firm uses only debt and common stock to finance their operations and maintains a debt-equity ratio of 0.6. The pre-tax cost of debt is 9.8 percent and the cost of equity is 12.4 percent. The tax rate is 34 percent. What is the projected net present value of this project? |
| Antonio's is analyzing a project with an initial cost of $44,000 and cash inflows of $26,000 a year for 2 years. This project is an extension of the firm's current operations and thus is equally as risky as the current firm. The firm uses only debt and common stock to finance their operations and maintains a debt-equity ratio of 0.7. The pre-tax cost of debt is 8.8 percent and the cost of equity is 11.9 percent. The tax rate is 34 percent. What is the projected net present value of this project? $3,902.95 $1,495.15 $14,129.79 $41,558.20 $986.80 |
