Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

Atlas Inc. is planning to invest in a four year project which has the same risk as the firm's existing assets and operations. The project requires a 150,000 dollar initial investment and is expected to generate equal annual after-tax cash flows for the next four years. In consultation with investment bankers, Atlas expects to be able to issue new debt at par with a coupon rate of 10% & to issue new preferred stock with a 3 dollar per share dividend at $30 a share. The common stock of the company is currently selling for $25.00 a share. Atlas Inc. expects to pay a dividend of 1 dollar per share next year. Market analysts foresee a growth in dividends in Atlas stock at a rate of 10% per year. Atlas's marginal tax rate is 30%.

[A] If Atlas raises capital using 45% debt, 5 percent preferred stock, and 50 percent common stock, what is its cost of capital?

[B] If Atlas's beta is 1.2, market risk premium is 7.5%, and the risk free rate is 5.0 percent, find out the discount rate the firm should use to evaluate this project?

[C] find out the minimum cash flow per year this project should generate over the next 4 years to be accepted by the company

[D] Atlas is also considering financing this project without issuing preferred stock. The company's optimal debt-to-equity ratio with no preferred stock in its capital structure is 0.25. If the management is expecting annual cash flows of 40,000 dollar, should the company accept this project under this scenario?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M919070

Have any Question? 


Related Questions in Basic Finance

A company has 1 00000 to invest in new rampd projects the

A company has $1, 00,000 to invest in new R&D projects. The company wants to determine what set of projects should be selected.   The following table summarizes the initial cost and revenue potential for each of the proj ...

1 list in order the major sections that all research papers

1. List in order the major sections that all research papers must have. 2. What is the purpose of the introduction of a paper? 3. When presenting the results of statistical analyses, what information should be presented? ...

Ethical dilemma- cindy and jack have always practiced good

Ethical Dilemma - Cindy and Jack have always practiced good financial habits, in particular, developing and living by a budget. They are currently in the market to purchase a new car and have budgeted $300 per month for ...

Alpha ltd deposits 500 000 cash with the state bank on 1

Alpha Ltd deposits $500 000 cash with the State Bank on 1 July 2016 for three months, i.e. 92 days, until 30 September 2016. The bank prepares a Certificate of Deposit (CD) for Alpha Ltd, which earns an interest of 6% pe ...

1 describe integrative management be specific concerning

1. Describe "integrative management." Be specific concerning the relationship between functionality and process. 2. In terms of enterprise extension, describe the importance of the information sharing and process special ...

A columnist in the economist argues that the past ten years

A columnist in the Economist argues that: The past ten years have dealt a series of blows to efficient-market theory, the idea that asset prices accurately reflect all available information. In the late 1990s dot-com com ...

You are a new loan officer with alpha mortgage and the

You are a new loan officer with Alpha Mortgage, and the manager of the loan department has just presented a problem to you. He is unable to complete the APR calculation on an adjustable rate mortgage which a borrower app ...

1 how do researchers maintain the confidentiality of

1. How do researchers maintain the confidentiality of participants' responses? 2. Describe the Milgram (1963) study and discuss the ethical issues it raised. 3. What are the basic ethical principles that animal researche ...

An annual survey of first-year college students asks 270000

An annual survey of first-year college students asks 270,000 students about their attitudes on a variety of subjects. According to a recent survey, 54% of first-year students believe that abortion should be legal. Use a ...

1 what is experimental contamination2 does a nonequivalent

1. What is experimental contamination? 2. Does a nonequivalent groups pretest-posttest design eliminate local history as a potential explanation of the results? Explain.

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen