Additional Questions on Chapter 12 Name: InterCont is a construction company that plans on purchasing...
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Additional Questions on Chapter 12 Name: InterCont is a construction company that plans on purchasing new equipment this year for a new project. The project is expected to return $700,000 per year for the next 5 years. The equipment needed will cost $5,000,000. In order to purchase this equipment, InterCont must acquire the necessary funds from several sources. 1. The following list shows the proportion of funds expected from each source, and the rate of interest (or similar cost) that will be required for each source: Bond issuance: Bank loan: Preferred Stock issuance: 30% of total funds, requires 10% interest per year 50% of total funds, requires 15% interest per year 20% of total funds, requires 7% dividend per year What is InterCont's Net Present Value of this project? Does the proposed project's Internal Rate of Return exceed the company's weighted average cost of capital
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