Part 1 A firm has the current liabilities and equity financing on its balance sheet....
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Part 1 A firm has the current liabilities and equity financing on its balance sheet. The firm has taxable income that puts it in a 38% federal tax bracket, and the state in which it operates levies a 6.5% income tax. Compute the firm's weighted average cost of capital. work in Excel and show the formulas used to solve each section. Source Short-term loan Long-term loan Retained Earnin Common stock Amount S 5,000,000 S20,000,000 S25,000,000 S50,000,000 Proportion 0.05 0.25 0.20 0.50 Interest 7.5% 5.8% 17.0% 22.0% gs Part 2 The same firm is considering the following projects to improve its production process. If the firm has a capital budget of S1,400,000, which projects should be accepted by the rate of return criteria? What is the firm's opportunity cost of capital? Project First Cost Anual Benefit Life (years) $250,000 $300,000 $125,000 $ 50,000 $250,000 $200,000 $400,000 $50,000 $70,000 $35,000 $12,500 $75,000 $32,000 $125,000 15 10 10 20 4 Part 3 From your estimates of the WACC in part 1 and the opportunity cost of capital in part 2, what do vou estimate the firm's true MARR to be
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