# Finance-AW-Q258

## Finance-AW-Q258 Online Services

Please include at least 2 decimal spaces on all percentages.

Part 1 A

Bremond Equipment Supply Corporation (BESC) needs to determine its Weighted Average Cost of Capital in order to make a few capital budgeting decisions.  The firm has already established the proporation of its capital.  Use these proportions in calculating the firm’s WAAC.

 Target Market Source of Capital Proportions Long-term debt 25% Preferred stock 6% Common stock equity 69%

Debt: BESC can sell a 15-year, semi-annual,\$1,000 par value, 8.75 percent bond for \$985. A flotation cost of 1.75 percent of the face value would be required in addition to the discount of \$15.

Preferred Stock: BESC has determined it can issue preferred stock at \$70 per share par value. The stock will pay an \$8.00 annual dividend. The cost of issuing and selling the stock is \$2 per share.

Common Stock: BESC’s common stock is currently selling for \$39 per share. The dividend expected to be paid at the end of the coming year is \$5.00. Its dividend payments have been growing at a constant rate for the last five years. Five years ago, the dividend was \$3.50. It is expected that to sell, a new common stock issue must be underpriced at \$4 per share and the firm must pay \$1 per share in flotation costs. Additionally, the firm’s marginal tax rate is 40 percent.

To help determine the firm’s WACC, we will break this problem down into steps

1. Calculate the rate for the new bond issue, notice is has semi-annual compounding.
2. Calculate the after-tax cost of the bond issue.
3. Calculate the cost of the new issue of preferred stock.
4. Calculate the growth rate of the common stock dividends.
5. Calculate the cost of the new common stock issue.
6. Finally, calculate the firm’s weighted average cost of capital assuming the firm has exhausted all retained earnings.
7.

As with the previous assignment – you need to show me how you calculated your answers in order to get the full credit for the problems.

You can read more about our case study assignment help services here.

## How it Works

#### How It works ?

Step 1:- Click on Submit your Assignment here or shown in left side corner of every page and fill the quotation form with all the details. In the comment section, please mention Case Id mentioned in end of every Q&A Page. You can also send us your details through our email id support@assignmentconsultancy.com with Case Id in the email body. Case Id is essential to locate your questions so please mentioned that in your email or submit your quotes form comment section.

Step 3:- Once we received your assignments through submit your quotes form or email, we will review the Questions and notify our price through our email id. Kindly ensure that our email id assignmentconsultancy.help@gmail.com and support@assignmentconcultancy.com must not go into your spam folders. We request you to provide your expected budget as it will help us in negotiating with our experts.

Step 4:- Once you agreed with our price, kindly pay by clicking on Pay Now and please ensure that while entering your credit card details for making payment, it must be done correctly and address should be your credit card billing address. You can also request for invoice to our live chat representatives.

Step 5:- Once we received the payment we will notify through our email and will deliver the Q&A solution through mail as per agreed upon deadline.

Step 6:-You can also call us in our phone no. as given in the top of the home page or chat with our customer service representatives by clicking on chat now given in the bottom right corner.

## Case Approach

#### Scientific Methodology

We use best scientific approach to solve case study as recommended and designed by best professors and experts in the World. The approach followed by our experts are given below:

Defining Problem

The first step in solving any case study analysis is to define its problem carefully. In order to do this step, our experts read the case two three times so as to define problem carefully and accurately. This step acts as a base and help in building the structure in next steps.

Structure Definition

The second step is to define structure to solve the case. Different cases has different requirements and so as the structure. Our experts understand this and follow student;s university guidelines to come out with best structure so that student will receive best mark for the same.

Research and Analysis

This is the most important step which actually defines the strength of any case analysis. In order to provide best case analysis, our experts not only refer case materials but also outside materials if required to come out with best analysis for the case.

Conclusion & Recommendations

A weak conclusion or recommendations spoil the entire case analysis. Our expert know this and always provide good chunks of volume for this part so that instructors will see the effort put by students in arriving at solution so as to provide best mark.

## Related Services

Part 1 B

Bremond Equipment Supply Corporation is now considering investment in two independent projects, A and C, which are described below. Please don’t assume anything.  Use the firm’s WACC which you just calculated to evaluate the projects.

 Option A Option C Initial Investment \$3,250,000 \$3,900,000 Year Cash Inflows (CF) 1 \$1,500,000 \$2,500,000 2 1,000,000 1,800,000 3 1,500,000 900,000 4 1,500,000 850,000

*Do not cut and paste this chart into your excel spreadsheet.  Something in the formatting causes excel to calculate it incorrectly!

1. Calculate Payback Period for both projects
2. Calculate NPV for both projects
3. Calculate PI for both projects
4. Calculate IRR for both projects
5. Which project should the firm accept?  Why?

Part 2

Another company is in the process of determining its WACC.  For this problem you will need to use the CAPM to calculate your answer.

(This problem is completely independent of Part 1A and 1B, all the information you need is given to you in the question.)

The current risk-free rate is 2.5% and the market is expected to return 7.5% per year.  The company’s beta is 2.1.  The company expects to pay 6.0% for its debt.  The target capital structure for the company is 55% equity and 45% debt.  The marginal tax rate is 37%.

1. What is the after-tax cost of debt?
2. What is the cost of equity?
3. Calculate the WACC.

Product Code-Finance-AW-Q258