Question:
1.) Briarcrest Condiments is a spice-making firm. Currently, it developed a new process for producing spices. The process needs new machinery that would cost $2,166,673. have a life of 5 years, and would produce the cash flows shown in the given table.
Year Cash Flow
1 $617,404
2 -210,293
3 701,253
4 1,079,487
5 560,778
What is the NPV if the discount rate is 15.30%?
2.) Capital Co. has a capital structure, based on present market values, that consists of 46 percent debt, 4 percent preferred stock, and 50 % common stock. If the returns needed by investors are 10 percent, 11 %, and 19 % for the debt, preferred stock, respectively, common stock, Evaluate Capital's after-tax WACC? Consider that the firm's marginal tax rate is 40 %.
After tax WACC =