**1) **Investment $2,000,000; repairs $ 1,000,000 ; salvage revenue at end of project (in 3 years) $500,000. cost of capial 12%.

cashflows $1,000,000 in year #1, $2,000,000 in year #2, $1,000,000 in year #3.

Calculate NPV?

**2) **Using the above information please calculate IRR.

**3) **A building will sell for $4 million in 6 years to the police department. The cost of holding the building will be 8 % per year. The investment cashflow of this project is $3.2 million. What is this project's NPV ? Is the project worth taking?

4) Please calculate the IRR for the project described in question #3.

**5) **A factory currently has a equity position of $ 4,000,000 with a cost of 10%, the preferred equity position is $2,000,000 with an annual cost of 15%, the company's debt cost is 6%. The company has assets worth $ 9,000,000. Please calculate the WACC.

**6) **The debt of this company is currently 60% of the total assets, the remainding capital structure is financed with common equity with a cost of 3%. The cost of the debt was $800,000 the entire $10,000,000 of the firm's liabilities. Please calculate the WACC with a tax rate of 40%.

**7) **With a tax rate of 40% and a total capital structure of $10,000,000. We need to calculate the WACC for the following two scenarios.

A)

composition of capital sttucture

debt 10.0 % with a cost of 8%

preferred equity 20.0 % with a cost of 10%

common equity 70.0 % with a cost of 6%

B)

composition of capital sttucture

debt 60.0 % with a cost of 8%

preferred equity 10.0 % with a cost of 10%

common equity 30.0 % with a cost of 3%

**C) **Which is the best for option for the company? Explain.

**8) **Break-even

A sandwich shop has been doing business for 10 years in Pinecrest. The shop currently operates out of a building that is paid for. The variable overhead expenses are 10% of the sales each sandwich. Each sandwich has a food cost of $1. All the sandwiches sell for $5 each.

At the new location in the Falls area, the monthly cost of rent will be $6,000. The sales price will also be $5, with a food cost of $1 ,and 10% overhead expense of price of each sanchwich sold.

**a)**What is the break even in dollars and **b**) units for the new location?

**c) **How much will the new shop need to sell to generate a monthly profit of $12,000.

**9) **A seminar series has set up costs of $3,000; a rent per event of $1,000; plus a variable cost of $30 per attendee for food, supplies, and refreshments. The price of the seminar admission is $100 per person.

What is the break even in **a**) units{people} and ** b**) dollars for each seminar?

**10) **Please prepare a simple balance sheet for The BBQ Company before **a**) and after **b**) the change in capital structure.

The company currently has total assets of $12,000,000. They want to expand with an additional plant in West Palm Beach at a cost of $5,000,000. The new operation will be financed in its entirety with preferred equity from Miramar Trust.

Miramar Trust will receive a $4 dividend on each share of its preferred stock of $50.00. The equity of the company is 40% with an annual cost of 4%, 50% of the original capital structure is in debt with a rate of 8% and the remainder is in preferred equity at the same rate as of the new preferred stock and also held by Miramar Trust.

c) Calculate the WACC before **c**) and after the expansion **d**). **e**) How many shares will Miramar Trust hold in The BBQ company?

Subject | Business |

Due By (Pacific Time) | 11/23/2015 01:00 pm |

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