Need this done by tonight. Please help. Most recent annual common dividend $4.0

[answerhappygod]

Need this done by tonight. Please help.
Most recent annual common
dividend
$4.00
Today’s common stock price


$50.00
U.S. Treasury 10y annual rate


3 percent
Market risk
premium
5 percent
Equity Risk Premium on Bond
Yield
10 percent
Number of common shares
outstanding
2.5 million
Today’s preferred stock price


$100.00
Fixed preferred dividend



$8.00
Constant growth rate



6 percent
Beta β




2.0
Floatation costs for Preferred stock issuance

7 percent
Market price of the bond



$1,100.00
Annual coupon on the bond


$70.00
Years to bond
maturity
5 years
Par value bond



$1,000
Number of preferred shares
outstanding
200,000
Number of bonds
outstanding
200,000
Income Statement (amounts in millions)
Sales



$200,000
Variable operating costs (60% of
sales) (120,000)
Gross
profit
80,000
Fixed operating
costs (40,000)
Net operating income (EBIT)


40,000
Interest
expense (10,000)
Taxable income



30,000
Taxes



(12,000)
Net
income $18,000
Company can raise more debt by selling 50,000 new bonds at the
same rate (interest) and receiving the market price of the bond
i.e. $1,100. The outstanding 200,000 bonds and the additional
50,000 is the maximum the company can raise in debt. After this
amount, the average after tax cost of debt will be increased by 1
percent.
In the upcoming annual financial results, the company expects to
generate 75 million dollars in retained earnings for the capital
budgeting projects. Any requirement of funds beyond this would
require issuance of new stock at the market price of $50 per share
while maintaining the existing capital structure.
Company has following projects for consideration
Projects
Investment
Expected MIRR
A
$50
million
13 percent
B
$60
million
10 percent
C
$100
million
8 percent
D
$10
million
7.5 percent