Retlaw Corporation (RC) manufactures time-series photographic equipment. It is currently at ts target debt-equity ratio of 074 itsconsidering building a new 548 million manufacturing facility. This new plant is expected to generate sher-tax cash flows of $4milion in perpetuity. The company raises all equity from outside financing. There are three financing options1 A new issue of common stock: The flotation costs of the new common stock would be 7% of the amount raised. The required returon the company's new equity is 14%2 A new issue of 20-year bonds The flotation costs of the new bonds would be 4% of the proceeds. If the company issues these newbonds at an annual coupon rate of 80%, they will sell at par3 Increased use of accounts payable financing Because this financing is part of the company's ongoing daily business, it has nofotation costs, and the company assigns it a cost that is the same as the overall frm WACC Management has a target ratio ofaccounts payable to long-term debt of 0135 (Assume there is no difference between the pre-tax and after-tax accounts payablecost)What is the NPV of the new plant? Assume that RC has a 46% tax rate (Enter the answer in deitars. De not round Intermediatecalculations, Round the WACC percentage to 2 decimal pieces. Bound the final answer to 2 decimat pisces. Ons s sign in yourresponse)NOV

We have to calculate Weighted Average Cost of Capital (WACC) to calculate Net Present Value (NPV).…

What is the NPV of the new prant? Assume that RC has a 40% tex rate Enter the answer in dollars. Do not round intermediate calcul ens Round the WACC percentage to 2 decimal pieces Bound the final anewer to 2 decimal places. On Sign in your NPV

What is the NPV of the new prant? Assume that RC has a 40% tex rate Enter the answer in dollars. Do not round intermediate calcul ens Round the WACC percentage to 2 decimal pieces Bound the final anewer to 2 decimal places. On Sign in your NPV

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section: Chapter Questions

Problem 20P

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