1. Regal Industries has the following capital structure. Its corporate tax rate is 35%.
Security- Book Value- Market Value- Weight- Cost
Debt- $18 million -$20 million ---no weight given------(5%-Cost)
Preferred stock- $10 million- $10 million--no weight given------------ (8.5%-Cost)
Common stock- $37 million- 60 million ---no weight given--------(16%-Cost)
A. Compute WACC = = ………………………….. %
B. Regal is evaluating a project costing $58,000 which will generate $15,000 for 6 years. It will require an increase of $2,000 in NWC at the outset, but no recapture. Should Regal accept the project?
NPV = $ ……………………………… Accept? ……………………….