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1. Jungle Joes has a debt-equity ratio of 1.05. The...

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Finance

1.

Jungle Joes has a debt-equity ratio of 1.05. The firm has a flotation cost of debt of 7.4 percent and a flotation cost for equity of 12.74 percent. How much does the firm need to borrow to fully fund a project that has an initial cost of $68.0 million?

$78.255 million

$73.306 million

$75.560 million

$77.508 million

2.

Preston Industries has a WACC of 11.68 percent. The capital structure consists of 60.6 percent equity and 35.6 percent debt. The aftertax cost of debt is 6.1 percent and the cost of equity is 14.80 percent. What is the cost of preferred stock? 14.20 percent

17.10 percent

16.40 percent

18.30 percent

3.

Jensen Shipping is considering a project that has an initial cost of $230,000. The project will produce aftertax cash flows of $43,000 a year forever. The firms WACC is 14.2 percent and its tax rate is 35 percent. Equity has a flotation cost of 11.5 percent while the flotation cost for debt is 6.5 percent. What is the net present value of this project, including the flotation costs, if the firms debt-equity ratio is .6? (Rounded)

$42,919

$27,506

$33,506

$48,322

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