You have the following information about Burgundy Basins, a sink manufacturer. ...
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Finance
You have the following information about Burgundy Basins, a sink manufacturer.
| Equity shares outstanding | 20 | million | |
| Stock price per share | $ | 39 | |
| Yield to maturity on debt | 7.5 | % | |
| Book value of interest-bearing debt | $ | 350 | million |
| Coupon interest rate on debt | 4.4 | % | |
| Market value of debt | $ | 245 | million |
| Book value of equity | $ | 410 | million |
| Cost of equity capital | 11.8 | % | |
| Tax rate | 35 | % | |
Burgundy is contemplating what for the company is an average-risk investment costing $38 million and promising an annual ATCF of $4.9 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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