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Bergeron Foods is considering the following independent projects for the coming year: Project RequiredInvestment ExpectedRate of Return Risk X $6 million 14.5% High Y   6 million 10.5% Average Z   8 million 10.5% Low Bergeron’s WACC is 12 percent, but it adjusts for risk by adding 2 percent to the WACC for high-risk projects and subtracting 2 percent for low-risk projects.  Which project(s) should Bergeron accept assuming it faces no capital constraints?

Koerschen Corporation can invest in one of two mutually exclusive machines that will make a product it needs for the next 4 years.  Machine J costs $10 million but realizes after-tax inflows of $6.6 million per year for 2 years, after which it must be replaced.  Machine K costs $17 million and realizes after-tax inflows of $7.6 million per year for 4 years.  Based on the firm’s cost of capital of 7 percent, the NPV of Machine K is $8,742,806, with an equivalent annual annuity (EAA) of $2,581,122 per year.  Calculate the EAA of Machine J. Compare your result to that of Machine K and decide which to recommend.

Ritter Manufacturing can invest in one of two mutually exclusive machines that will make a product it needs for the next 8 years.  Machine A costs $15 million but realizes after-tax inflows of $4.7 million per year for 4 years, after which it must be replaced.  Machine B costs $22 million and realizes after-tax inflows of $4.6 million per year for 8 years.  Based on the firm’s cost of capital of 7 percent, the NPV of Machine B is $5,467,973, with an equivalent annual annuity (EAA) of $915,709 per year.  Calculate the EAA of Machine A. Compare your result to that of Machine B and decide which to recommend.

The Crabtree Company’s cost of common equity is 12 percent, its before-tax cost of debt is 7 percent, and its marginal tax rate is 25 percent.  Given Crabtree’s market value capital structure below, calculate its WACC. Long-term debt $14,000,000 Common equity   46,000,000 Total capital $60,000,000

A firm with a 13 percent cost of capital is evaluating two projects for this year’s capital budget.  The projects’ expected after-tax cash flows are as follows: Year: 0 1 2 3 Project X: -$7,000 $2,300 $3,900 $3,700 Project Y: -$11,000 $5,400 $5,100 $5,900 If Projects X and Y are mutually exclusive, which one(s) should the firm adopt?

A firm with a 9 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$8,000 $3,600 $3,300 $3,000 $2,900 Calculate the project’s internal rate of return (IRR).

Spelling, punctuation, and accent mark count toward grading.  Misspelled, wrong tense, wrong form of verbal conjugation, article, or preposition (- full points worth). Missing accents from the words you have been exposed to during the chapter, punctuation–periods, capital letters, upside-down exclamation or question marks–If needed (-1/4 points).   Accent Marks Please write me a short message, in parenthesis, next to the word that needs it, for instance: You need to write  ¡Mi mamá comprará el juguete mañana para Iván! You will write it like (upside-down exclamation mark) Mi mama (accent on the 2nd a) comprara (accent on the second a) el juguete manana (tilde over the 1st n) para Ivan (accent on a)! Notice that when there is more than one repeated vowel/consonant, I used more details on which vowel/consonant the accent mark was placed–mamá, mañana, etc. Unlike the name “Ivan” which has one accentuated vowel.   Directions: You will be given an English word. Your task is to change the English word into a Spanish word as you learned in Quizlet. To earn full credit, it would be best to use the matching article, such as “the, a, an,” when answering your task in Spanish.   The English word is “problem” 1) [1] 2) [2]. (This is a 2-word answer and there is a need for a definite article).  Do not write the whole answer in a single blank. Use one blank for each answer, for example, if the answer is “color purple,” you will write “color” in the first box and “purple” in the 2nd box.

Coronado & Associates’ common stock currently trades at $60 a share.  It is expected to pay an annual dividend of $2.40 a share at the end of the year (D1 = $2.40), and the constant growth rate is 7.6 percent a year.  What is the company’s cost of common equity if all of its equity comes from retained earnings?

A firm with a 12.5 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$9,000 $3,400 $3,000 $3,500 $4,100 Calculate the project’s payback period.

The Fontenot Company’s cost of common equity is 15 percent, its before-tax cost of debt is 11 percent, and its marginal tax rate is 30 percent.  Given Fontenot’s market value capital structure below, calculate its WACC. Long-term debt $26,000,000 Common equity   54,000,000 Total capital $80,000,000