# Calculate the cost | Business & Finance homework help

Use the following information for questions 1 through 4

Rollins Corporation is estimating its WACC.  It’s current and target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 12 percent coupon rate, paid semiannually, a current maturity of 20 years, and sell for \$1,040.  The firm could sell, at par, \$100 preferred stock which pays a \$12.00 annual preferred dividend.  Rollins’ common stock beta is 1.2, and the risk-free rate is 10 percent. Rollins is a constant-growth firm which just paid a dividend of \$2.00.  Its stock sells for \$27.00 per share, and has a growth rate of 3 percent.  The floatation cost is 5% for debt, 10% for preferred stock, and 25% for common stock.  The firm’s marginal tax rate is 40 percent.

Question 1 (worth 15 out of 100 possible points for the quiz)

Part a. Calculate the cost of existing debt.

Part b. Calculate the cost of new debt.

Question 2 (worth 15 out of 100 possible points for the quiz)

Part a. Calculate the cost of existing preferred stock.

Part b. Calculate the cost of new preferred stock.

Question 3 (worth 15 out of 100 possible points for the quiz)

Part a. Calculate the cost of existing common stock.

Part b. Calculate the cost of new common stock.

=[(2.00*(1+0.08)/27(1-0.06)]+0.08=0.1651=16.51%)

Question 4 (worth 15 out of 100 possible points for the quiz)

Part a. Calculate the weighted average cost of capital (WACC) for existing capital

Part b. Calculate the weighted average cost of capital (WACC) for new capital

Question 5 (worth 15 out of 100 possible points for the quiz)

Given that the company’s required return (WACC) is 10%, rank the two following projects:

Use only one best method to rank the projects

 Project A B Project life 12 years 12 years Initial investment \$1,200,000 \$1,500,000 Annual operating cash flows \$180,000 \$225,000

Question 6 (worth 25 out of 100 possible points for the quiz)

Foley Systems is considering a new investment whose data are shown below.  The equipment would be depreciated using the MCRS system basis over the project’s 4-year life, would have a zero salvage value, and would require some additional working capital that would be recovered at the end of the project’s life.  Revenues and other operating costs are expected to be constant over the project’s life.  What is the project’s NPV?

The accelerated rates for such property are 33%, 45%, 15%, and 7% for Years 1 through 4.

WACC                                                                                                                          10.0%

Net initial investment in fixed assets                                                                         \$75,000

Required new working capital                                                                                   \$15,000

Sales revenues, each year                                                                                           \$75,000

Operating costs (excluding depreciation), each year                                                 \$25,000

Tax rate                                                                                                                         35.0%

Basic features
• Free title page and bibliography
• Unlimited revisions
• Plagiarism-free guarantee
• Money-back guarantee
On-demand options
• Writer’s samples
• Part-by-part delivery
• Overnight delivery
• Copies of used sources
Paper format
• 275 words per page
• 12 pt Arial/Times New Roman
• Double line spacing
• Any citation style (APA, MLA, Chicago/Turabian, Harvard)

# Our guarantees

We value our customers and so we ensure that what we do is 100% original..
With us you are guaranteed of quality work done by our qualified experts.Your information and everything that you do with us is kept completely confidential.

### Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

### Zero-plagiarism guarantee

The Product ordered is guaranteed to be original. Orders are checked by the most advanced anti-plagiarism software in the market to assure that the Product is 100% original. The Company has a zero tolerance policy for plagiarism.

### Free-revision policy

The Free Revision policy is a courtesy service that the Company provides to help ensure Customer’s total satisfaction with the completed Order. To receive free revision the Company requires that the Customer provide the request within fourteen (14) days from the first completion date and within a period of thirty (30) days for dissertations.

The Company is committed to protect the privacy of the Customer and it will never resell or share any of Customer’s personal information, including credit card data, with any third party. All the online transactions are processed through the secure and reliable online payment systems.

### Fair-cooperation guarantee

By placing an order with us, you agree to the service we provide. We will endear to do all that it takes to deliver a comprehensive paper as per your requirements. We also count on your cooperation to ensure that we deliver on this mandate.

## Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
\$26
The price is based on these factors: