1. If I will have $25,000 in 10 years, will earn 10% interest annually on my investment, will not make any payments during the interim, how much must I invest today? a. What are you solving for? b. What is your answer?
2. Our company has $100 million in Common Stock and no preferred stock, the company's tax rate is 25%, each share is currently selling for $125.00, dividends for the past 5 years have been:
2015 $3.50
2014 $3.04
2013 $2.65
2012 $2.30
2011 $2.00
What is our required return for Common Stock?
3. Our company has $75 million in Bonds outstanding, that have a par value of $1,000, a coupon rate of 12%, and is currently selling for $950. The company's tax rate is 25%. What is our required return for Bonds? Our company has no Preferred Stock and using the information in questions 4 and 5 a. How much capital does the company have? b. What percentage of our capital is common stock? c. What is the Weighted Average Cost of Capital for our company? _ Our company has 3 projects to evaluation and $575,000 to spend. Given the information in problems 4, 5 and 6, the project results are as follows: Project 1: Investment is $300,000 and the NPV is $10,500 Project 2: Investment is $300,000 and the NPV is -$8,500 Project 3: Investment is $275,000 and the NPV is $9,500 What decisions do you make regarding the projects?