You have the following information about Burgundy Basins, a sinkmanufacturer.Equity shares outstanding20million...You have the...

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Accounting

You have the following information about Burgundy Basins, a sinkmanufacturer.
Equity shares outstanding 20 million
Stock price per share $ 30
Yield to maturity on debt 7.5 %
Book value of interest-bearing debt $ 320 million
Coupon interest rate on debt 3.5 %
Market value of debt $ 200 million
Book value of equity $ 320 million
Cost of equity capital 10.0 %
Tax rate 35 %
Burgundy is contemplating what for the company is anaverage-risk investment costing $20 million and promising an annualATCF of $4.0 million in perpetuity.
a. What is the internal rate of return on the investment?(Round your answer to 2 decimal places.)
b. What is Burgundy's weighted-average cost of capital?(Round your answer to 2 decimal places.)

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Answer a Computation of internal rate of return Internal rate of rate at which net present value NPV is zero Present value of perpetuity is simply Crwhere in C is the same cash flow every year and r is the discount rate If we See Answer

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In: AccountingYou have the following information about Burgundy Basins, a sinkmanufacturer.Equity shares outstanding20million...You have the following information about Burgundy Basins, a sinkmanufacturer.Equity shares outstanding20millionStock price per share$30Yield to maturity on debt7.5%Book value of interest-bearing debt$320millionCoupon interest rate on debt3.5%Market value of debt$200millionBook value of equity$320millionCost of equity capital10.0%Tax rate35%Burgundy is contemplating what for the company is anaverage-risk investment costing $20 million and promising an annualATCF of $4.0 million in perpetuity.a. What is the internal rate of return on the investment?(Round your answer to 2 decimal places.)b. What is Burgundy's weighted-average cost of capital?(Round your answer to 2 decimal places.)


Equity shares outstanding		20	million
Stock price per share	$	30
Yield to maturity on debt		7.5	%
Book value of interest-bearing debt	$	320	million
Coupon interest rate on debt		3.5	%
Market value of debt	$	200	million
Book value of equity	$	320	million
Cost of equity capital		10.0	%
Tax rate		35	%