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APPENDIX B: CAPITAL BUDGETING GROUP PRESENTATION ACMC Inc. is a multinational conglomerate… 1 answer below » APPENDIX B: CAPITAL BUDGETING GROUP PRESENTATION ACMC Inc. is a multinational conglomerate corporation providing a wide range of goods and services to its customers. As part of its budgeting process for the next year, it has three mutually exclusive projects under consideration, and it might decide which project should receive the investment funds for this year. As part of the financial analysis team, it is up to you to determine the appropriate valuation of each project. However, before you can determine the appropriate valuations of these projects, you need to determine the weighted View complete question » APPENDIX B: CAPITAL BUDGETING GROUP PRESENTATION ACMC Inc. is a multinational conglomerate corporation providing a wide range of goods and services to its customers. As part of its budgeting process for the next year, it has three mutually exclusive projects under consideration, and it might decide which project should receive the investment funds for this year. As part of the financial analysis team, it is up to you to determine the appropriate valuation of each project. However, before you can determine the appropriate valuations of these projects, you need to determine the weighted average cost of capital for the firm. Do remember that management has a preference in using the market values of the firm’s capital structure and believes it current structure is optimal. Document Preview: APPENDIX B: CAPITAL BUDGETING GROUP PRESENTATION ACMC Inc. is a multinational conglomerate corporation providing a wide range of goods and services to its customers. As part of its budgeting process for the next year, it has three mutually exclusive projects under consideration, and it might decide which project should receive the investment funds for this year. As part of the financial analysis team, it is up to you to determine the appropriate valuation of each project. However, before you can determine the appropriate valuations of these projects, you need to determine the weighted average cost of capital for the firm. Do remember that management has a preference in using the market values of the firm’s capital structure and believes it current structure is optimal. BALANCE SHEET Cash 2,000,000 Accounts Payable and Accruals 18,000,000 Accounts Receivable 28,000,000 Notes Payable 40,000,000 Inventories 42,000,000 Long-Term Debt 60,000,000 Preferred Stock 10,000,000 Net Fixed Assets 133,000,000 Common Equity 77,000,000 Total Assets 205,000,000 Total Claims 205,000,000 Market Values of Capital • The company has 60,000 bonds with a 30-year life outstanding, with 15 years until maturity. The bonds carry a 10 percent semi-annual coupon, and are currently selling for $874.78. • You also have 100,000 shares of $100 par, 9% dividend perpetual preferred stock outstanding. The current market price is $90.00. Any new issues of preferred stock would incur a $3.00 per share flotation cost. • The company has 5 million shares of common stock outstanding with a currently price of $14.00 per share. The stock exhibits a constant growth rate of 10 percent. The last dividend (D0) was $.80. New stock could be sold with flotation costs, including market pressure, of 15 percent. • The risk-free rate is currently 6 percent, and the rate of return on the stock market as a whole is 14 percent. Your stock’s beta is 1.22. • Your firm does not use notes payable for long-term financing. •… Attachments: Q..docx View less » Sep 11 2015 10:53 AM
