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Category > Business & Finance Posted 06 Jun 2017 My Price 12.00

Two companies, TimCo., Inc. and MitCo.

Question description

 

 

Two companies, TimCo., Inc. and MitCo., Inc. have the identical cost for each individual element of their capital. Calculate the overall WACC for each company and analysis why there is a difference in the WACC.

TimCo,

 

Inc.

    
     

Type of Capital

Book Value

Cost

Long-Term Debt

$500,000

6.20%

Common Stock Equity

$400,000

15.00%

Preferred Stock

$75,000

13.00%
     

MitCo, Inc.

    

Type of Capital

Book Value

Cost

Long-Term Debt

$450,000

6.20%

Common Stock Equity

$500,000

15.00%

Preferred Stock

$60,000

13.00%
     

Calculate the payback period, NPV, and IRR for a firm with a 9% cost of capital on a project costing $125,000 with a six-year life based on the following information:

Year

Cash Inflow

1

$35,000

2

$30,000

3

$32,000

4

$25,000

5

$22,000

6

$20,000

 

Answers

QuickHelper
(10)
Status NEW Posted 06 Jun 2017 07:06 AM My Price 12.00

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