22 Jul WHICH OF THE ABOVE PROJECTS SHOULD THE COMPANY TAKE ON?
Mars Car Company has a capital structure made up of 40% debt and 60% equity and a tax rate of 30%. A Show more Mars Car Company has a capital structure made up of 40% debt and 60% equity and a tax rate of 30%. A new issue of $1000 par bonds maturing in 20 years can be issued with a coupon of 9% at a price of $1098.18 with no flotation costs. The firm has no internal equity available for investment at this time but can issue new common stock at a price of $45. The next expected dividend on the stock is $2.70. The dividend for Mars Co. is expected to grow at a constant annual rate of 5% per year indefinitely. Flotation costs on new equity will be $7.00 per share. The company has the following independent investment projects available: Project Initial Outlay IRR 1 $1000000 10% 2 $10000 8.5% 3 $50000 12.5% Which of the above projects should the company take on? A)Project 3 only B) Projects 1 2 and 3 C) Projects 1 and 3 D) Projects 1 and 2 Show less
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