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##### -Speedy Delivery Systems can buy a piece of

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;;-Speedy Delivery Systems can buy a piece of equipment that should provide an 6 percent return and can be financed at 3 percent with debt. The CEO likes earning more than the cost of debt, and he thinks this would be a good deal. The firm can also buy a machine that would yield a 14 percent return but would cost 16 percent to finance through common equity. Earning less than the cost of equity sounds bad to the CEO. Assume debt and common equity each represent 50 percent of the firm?s capital structure.;(a);Compute the weighted average cost of capital. (Round your intermediate and final answers to 1 decimal place. Omit the "%" sign in your response.);Weighted average cost of capital;%;(b);Which project(s) should be accepted?;Piece of equipment should be financed.;New machine should be financed.;-United Business Forms? capital structure is as follows;Debt;35;%;Preferred stock;30;Common equity;35;The aftertax cost of debt is 10 percent, the cost of preferred stock is 13 percent, and the cost of common equity (in the form of retained earnings) is 16 percent.;Calculate United Business Forms? weighted cost of each source of capital and the weighted average cost of capital. (Round your answers to 2 decimal places. Omit the "%" sign in your response.);Weighted cost;Debt (K d);%;Preferred stock (K p);Common equity (K e);Weighted average cost of capital (K a);%;-Assume a $260,000 investment and the following cash flows for two products;Year;Product X;Product Y;1;$;90,000;$;80,000;2;80,000;70,000;3;80,000;50,000;4;40,000;80,000;(a);Calculate the payback for products X and Y. (Round your answers to 2 decimal places.);Payback period;Product X;years;Product Y;years;(b);Which alternative would you select under the payback method?;Product X;Product Y;-Hamilton Control Systems will invest $99,000 in a temporary project that will generate the following cash inflows for the next three years. Use Appendix B.;Year;Cash flow;1;$;37,000;2;34,000;3;95,000;The firm will also be required to spend $18,000 to close down the project at the end of the three years.;(a);Compute the net present value if the cost of capital is 11 percent. (Round "PV Factor" to 3 decimal places. Round your answer to the nearest dollar amount. Negative amount should be indicated by a minus sign. Omit the "$" sign in your response.);Net present value;$;(b);Should the investment be undertaken?

Paper#81479 | Written in 18-Jul-2015

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