Question Details

Follow the instructions and complete assignment! Document Preview: Provide detailed step by step solution explaining in words on how you get to the answers. The answers are provided to you and highlighted, however you have to explain step by step on how you get to the answers: 2.1. Potsdam Co has 3 million shares of common stock, each selling for \$30, with? = 1.7. The company has \$40 million in long-term bonds, selling at par, with coupon 7%. The tax rate of Potsdam is 30% and the risk-free rate is 5%. The expected return on the market is 12%. Find the WACC for Potsdam. 13.21%? 2.2. Ohio Corporation has 6 million shares of common stock priced at \$25 per share, which has just paid its annual dividend of \$1.75. The dividends have grown steadily at the rate of 5% per year and the investors expect the growth to continue in the future. The 6% coupon bonds of the corporation have a face value of \$60 million. The bonds will mature in 10 years and currently they sell at \$857.14 each. The tax rate of Ohio is 25%. Calculate its WACC. 10.73%? 2.3. Erlangen Corporation needs a new machine that will cost \$50,000. It will run for 5 years and the firm will depreciate it on a straight line basis, with no resale value. The machine will add \$14,000 annually to Erlangen's earnings before taxes. The proper discount rate is 12% and the tax rate is 32%. Should Erlangen install the machine? NPV = -\$4147, no? 2.4. Freiburg Company wants to buy a machine that has expected life of 6 years. It costs \$30,000, and increases the income of the company by \$7,000 annually. It has a salvage value of \$5,000. The proper discount rate is 12%, and the company pays no taxes at present. Should Freiburg purchase this machine? NPV = \$1,313, yes.? 141 Attachments: Questions.docx
More Details:

Treasury Management

Solution details:
STATUS
QUALITY
Approved

This question was answered on: Dec 18, 2020

Solution~00031147683692.zip (25.37 KB)

This attachment is locked

We have a ready expert answer for this paper which you can use for in-depth understanding, research editing or paraphrasing. You can buy it or order for a fresh, original and plagiarism-free copy (Deadline assured. Flexible pricing. TurnItIn Report provided)

STATUS

QUALITY

Approved

Dec 18, 2020

EXPERT

Tutor