Firm Z has issued 1,000,000 bonds. Each bond is priced at $929 and has a face value of $1000. It pays annual coupon payments and has a coupon rate of 3%. The bonds will mature in 20 years. Stock price of Firm Z is $10, and there are 50 million shares outstanding. There are 2 million shares of preferred stock, which offers $2 dividend and is priced at $40. Equity beta of Firm Z is 1.5 and current market portffolio yields 8% and the risk free rate is 2%. Corproate tax rate is 30%. Find the costs of debt, equity, preferred stock and WACC. Firm Z has invested $4 million in marketing campaign to assess the demand for the product Minish. This product will be in the market next year and will last five years. Revenues are projected to be $50 million per year along with expenses of $20 million. The firm spends $15 million immediately on equipment that will be depreciated using MACRS depreciation to zero. Additionally, it will use some fully depreciated existing equipment that has a market value of $4 million. Finally, Minish will have no incremental cash or inventory requirements (products will be shipped directly from the contract manufacturer to customers). But, receivables are expected to account for 15% of annual sales. Payables are expected to be 15% of the annual cost of goods sold (COGS) between year 1 and year 4. All accounts payables and receivables will be settled at the end of year 5. Based on this information and WACC in the first part of the question, find the NPV of the project. Identify the IRR of the project. Draw NPV vs r graph of the project. Will you accpet this project? Why? Please show your work
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
Firm Z has issued 1,000,000 bonds. Each
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