- When Is Lowering Wacc Consistent With Maximizing Shareholder Wealth 1 (38.69 KiB) Viewed 53 times
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When is lowering WACC consistent with maximizing shareholder wealth?
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answerhappygod
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When is lowering WACC consistent with maximizing shareholder wealth?
When is lowering WACC consistent with maximizing shareholder wealth?
1. When is lowering WACC consistent with maximizing shareholderwealth? A project costs $450M. It will provide additional revenue of 60M per year for 30 years while also costing 18M per year to run. It will require an addition to net working capital of 7M for the life of the project. Project will be depreciated straight line to zero over the project's life. The tax rate is 25%. The investment is expected to be sold for scrap for $6M at the end of the project. Let the T-bill rate be 1%, the company's beta is 1.1. Let the market risk premium be 6%. The preferred dividend is $6. The company has 150,000 bonds priced at $980. The coupon rate is 7% and the time to maturity is 12 years. The company has 100,000 shares of preferred priced at $85. The company has 3M shares of common priced at $65. The company's dividends growth at 25% per year. The next dividend is $4. 2. What is cost of equity using CAPM model? . Re=Rf + (Rm + Rp) R = 1 % +6% 1, 1 = 7,6 %
1. When is lowering WACC consistent with maximizing shareholderwealth? A project costs $450M. It will provide additional revenue of 60M per year for 30 years while also costing 18M per year to run. It will require an addition to net working capital of 7M for the life of the project. Project will be depreciated straight line to zero over the project's life. The tax rate is 25%. The investment is expected to be sold for scrap for $6M at the end of the project. Let the T-bill rate be 1%, the company's beta is 1.1. Let the market risk premium be 6%. The preferred dividend is $6. The company has 150,000 bonds priced at $980. The coupon rate is 7% and the time to maturity is 12 years. The company has 100,000 shares of preferred priced at $85. The company has 3M shares of common priced at $65. The company's dividends growth at 25% per year. The next dividend is $4. 2. What is cost of equity using CAPM model? . Re=Rf + (Rm + Rp) R = 1 % +6% 1, 1 = 7,6 %