Suppose that Hanna Nails, Inc.’s capital structure features…

Suppose that Hanna Nails, Inc.’s capital structure features 45 percent equity, 55 percent debt, and that its before-tax cost of debt is 5 percent, while its cost of equity is 9 percent. If the appropriate weighted average tax rate is 40 percent, what will be Hanna Nails’ WACC?

You have been asked by the president of your company to eval…

You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $70,000. The truck falls into the MACRS three-year class, and it will be sold after three years for $5,000. Use of the truck will require an increase in NWC (spare parts inventory) of $10,000. The truck will have no effect on revenues, but it is expected to save the firm $32,000 per year in before-tax operating costs, mainly labor. The firm’s marginal tax rate is 40 percent. What will the operating cash flow for this project be during year 2?

PAW Industries has 5 million shares of common stock outstand…

PAW Industries has 5 million shares of common stock outstanding with a market price of $8.00 per share. The company also has outstanding preferred stock with a market value of $10 million, and 100,000 bonds outstanding, each with face value $1,000 and selling at 96 percent of par value. The cost of equity is 19 percent, the cost of preferred stock is 15 percent, and the cost of debt is 9 percent. If PAW’s tax rate is 34 percent, what is the WACC?