The Fontenot Company’s cost of common equity is 11 percent, its before-tax cost of debt is 7 percent, and its marginal tax rate is 25 percent.  Given Fontenot’s market value capital structure below, calculate its WACC. Long-term debt $  4,000,000 Common equity   6,000,000 Total capital $10,000,000

Directions Escuchar: Read these statements. Then listen to the message that Jaime left on his colleague’s voicemail and indicate whether each statement is cierto (true) or falso (false).   Click on the audio below to complete this section. Audio Credit to VHL   Don Fernando está regular.

Bergeron Foods is considering the following independent projects for the coming year: Project RequiredInvestment ExpectedRate of Return Risk X $6 million 14.5% High Y   6 million 10.5% Average Z   8 million 10.5% Low Bergeron’s WACC is 12 percent, but it adjusts for risk by adding 2 percent to the WACC for high-risk projects and subtracting 2 percent for low-risk projects.  Which project(s) should Bergeron accept assuming it faces no capital constraints?

The Bettencourt Company’s currently outstanding bonds have a 12.8 percent coupon and a 13.5 percent yield to maturity.  Bettencourt believes it could issue new bonds that would provide a similar yield to maturity.  If its marginal tax rate is 25 percent, what is Bettencourt’s after-tax cost of debt?

A firm with a 13.5 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$14,000 $6,300 $6,900 $5,900 $5,200 Calculate the project’s discounted payback period.

A firm with a 12.5 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$11,000 $5,100 $3,500 $3,500 $5,400 Calculate the project’s profitability index (PI).

A firm with a 9 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$8,000 $3,600 $3,300 $3,000 $2,900 Calculate the project’s internal rate of return (IRR).

The Crabtree Company’s cost of common equity is 14 percent, its before-tax cost of debt is 10 percent, and its marginal tax rate is 30 percent.  Given Crabtree’s market value capital structure below, calculate its WACC. Long-term debt $22,000,000 Common equity   38,000,000 Total capital $60,000,000

Spelling, punctuation, and accent mark count toward grading.  Misspelled, wrong tense, or wrong form of verbal conjugation (- full points worth).  Missing article or preposition (-1/2 point). Missing accents from the words you have been exposed to during the chapter, and punctuation–periods, capital letters, upside-down exclamation or question marks–If needed (-1/4 points).   Accent Marks Please write me a short message, in parenthesis, next to the word that needs it, for instance: You need to write  ¡Mi mamá comprará el juguete mañana para Iván! You will write it like (upside-down exclamation mark) Mi mama (accent on the 2nd a) comprara (accent on the second a) el juguete manana (tilde over the 1st n) para Ivan (accent on a)! Notice that when there is more than one repeated vowel/consonant, I used more details on which vowel/consonant the accent mark was placed–mamá, mañana, etc. Unlike the name “Ivan” which has one accentuated vowel.   Directions Singular or plural? Write the singular or the plural form of the nouns. Follow the model.  Model: –Hay una maleta.    No. Hay cuatro _________ . The answer is maletas.     Hay quince fotos.     No. Hay una [1].

A firm with a 9.5 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$15,000 $5,700 $4,700 $6,500 $7,400 Calculate the project’s profitability index (PI).