Use the above information to answer Questions 1 - 17. Kentucky Hardware Company (KHC) is considering...

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Use the above information to answer Questions 1 - 17. KentuckyHardware Company (KHC) is considering an investment project thatrequires a new machine for producing special tools. This newmachine costs $1,000,000 and will be depreciated over 10 years on astraight-line basis toward zero salvage value. KHC paid aconsulting company $50,000 last year to help them decide whetherthere is sufficient demand for the special tools. In addition tothe investment on the machine, KHC also invests $30,000 in networking capital. The company pays $45,000 in interest expensesannually. KHC has estimated the performance of the new machine andbelieves that the new machine will produce $350,000 per year insales, $130,000 per year in cost of goods sold, and $25,000 peryear in administrative expenses. In order to get an estimate ofcost of capital, KHC collect the following information. KHC has310,400 shares of common stock outstanding, 15,000 shares ofpreferred stock outstanding, and 8,000 issues of corporate bondoutstanding. The bonds have face value $1,000 and coupon rate 6%.The bonds make semiannual coupon payments, have 25 years tomaturity, and sell for 131.4236% of par. The common stock sells for$56 per share and has a beta of 1.05. KHC’s next common stockdividend is expected to be $2.80 per share, and the common stockdividend is expected to grow at 7.7% indefinitely. The preferredstock sells for $72 per share and pays $4.5 annual dividend. Themarket risk premium is 8%, T-bills are yielding 4.5%, and KHC’s taxrate is 25%.
What is the cost of preferred stock for KHC? a. 6.25% b. 16% c.6.25 d. 16
What is the after-tax cost of debt for KHC? a. 3% b. 2% c. 5% d.4%
What is KHC's cost of equity estimated by using the capitalasset pricing model? a. 10.2% b. 12.9% c. 14.1% d. 15.4%
What is KHC's cost of equity estimated by using the dividendgrowth model? a. 10.2% b. 12.7% c. 13.1% d. 9.5%
What is KHC's market value capital structure? a. $31,517,788 b.$37,361,828 c. $28,976,288 d. $19,285,318

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Cost of preferred stock for KHC Cost of preferred stock for KHC Annual Preferred Dividend Market price per share x 100 450 7200 x 100 625 Cost of preferred stock for KHC a 625 Aftertax cost of debt for KHC The Aftertax Cost of Debt is the aftertax Yield to maturity of the Bond The Yield to maturity of YTM of the Bond is calculated using financial calculator as follows Normally See Answer

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Use the above information to answer Questions 1 - 17. KentuckyHardware Company (KHC) is considering an investment project thatrequires a new machine for producing special tools. This newmachine costs $1,000,000 and will be depreciated over 10 years on astraight-line basis toward zero salvage value. KHC paid aconsulting company $50,000 last year to help them decide whetherthere is sufficient demand for the special tools. In addition tothe investment on the machine, KHC also invests $30,000 in networking capital. The company pays $45,000 in interest expensesannually. KHC has estimated the performance of the new machine andbelieves that the new machine will produce $350,000 per year insales, $130,000 per year in cost of goods sold, and $25,000 peryear in administrative expenses. In order to get an estimate ofcost of capital, KHC collect the following information. KHC has310,400 shares of common stock outstanding, 15,000 shares ofpreferred stock outstanding, and 8,000 issues of corporate bondoutstanding. The bonds have face value $1,000 and coupon rate 6%.The bonds make semiannual coupon payments, have 25 years tomaturity, and sell for 131.4236% of par. The common stock sells for$56 per share and has a beta of 1.05. KHC’s next common stockdividend is expected to be $2.80 per share, and the common stockdividend is expected to grow at 7.7% indefinitely. The preferredstock sells for $72 per share and pays $4.5 annual dividend. Themarket risk premium is 8%, T-bills are yielding 4.5%, and KHC’s taxrate is 25%.What is the cost of preferred stock for KHC? a. 6.25% b. 16% c.6.25 d. 16What is the after-tax cost of debt for KHC? a. 3% b. 2% c. 5% d.4%What is KHC's cost of equity estimated by using the capitalasset pricing model? a. 10.2% b. 12.9% c. 14.1% d. 15.4%What is KHC's cost of equity estimated by using the dividendgrowth model? a. 10.2% b. 12.7% c. 13.1% d. 9.5%What is KHC's market value capital structure? a. $31,517,788 b.$37,361,828 c. $28,976,288 d. $19,285,318