HOW WOULD YOU COMPUTE THIS BY HAND AND USING A TI-84
CALCULATOR? WHAT ARE THE STEPS...
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HOW WOULD YOU COMPUTE THIS BY HAND AND USING A TI-84CALCULATOR? WHAT ARE THE STEPS FOR THE CALCULATOR? also for 2, howdo you calculate PMT for TVM solver on Calc
Consider the after-tax cash flows below from a project that isbeing considered by Despondus Corporation. Since the project is anextension of the firm's current business, it carries the same riskas the overall firm.
Year
0
1
2
3
4
5
Cash Flow
-$264,000
$92,000
$66,000
$95,000
$95,000
$102,000
Despondus Corporation's common stock is currently priced at$80.89, and there are 516,000,000 shares outstanding. A dividend of$4.24 per share was just paid, and dividends are expected to growat a constant rate of 5.18% per year.
The company has 6,130,000 bonds outstanding that mature in 19years and are currently priced at $932 per bond. The coupon rate is6.67%, and the bonds make semiannual interest payments. Thecompany's tax rate is 17%.
1. What is Despondus Corporation's after-tax cost of equity?
What is Despondus Corporation's after-tax cost of debt?
What is Despondus Corporation's weighted average cost ofcapital (WACC)?
What is the net present value of the project? (Round to thenearest dollar.)
Should the project be accepted? Explain your answer; a simple'yes' or 'no' will result in no points for this part of thequestion
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4.5 Ratings (710 Votes)
First the cost of equity is calculated using the dividend discount model It is calculated using the below formula KeD1Pog where D1 Next years dividend PoCurrent stock price gFirms growth rate Ke 4241 00518 8089 00518 44596 8089 00518 00551 00518 01069100 1069 The cost of debt is calculated by computing the yield to maturity Information provided Par value future value 1000 Time 19 years2 38 semiannual
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