PLEASE DO THE SOLUTIONS MANUALLY. NOT THRU EXCEL. OTHERWISE DOWNVOTE.PLEASE SKIP THIS IF YOU ALREADY DID THIS OTHERWISE, DOWNVOTE.I WILL UPVOTE IF YOU FOLLOW MY INSTRUCTIONS Problem 3. Mala Prohibita Inc. is evaluating a proposal to acquire a new equipment. The equipment wouldrequire an investment of P417,860, including freight and installation cost of P40,000. It expected to have a 10-year life with no scrap value at the end of its life. It has been estimated that the new equipment would increasethe company's cash inflows, net of expenses and income taxes by P68,000. The company can issue its 7%P1,000 par value bond to fund the project. The same type of bond is available in the market at P932.04836 perbond with interest payable semi-annually for ten years. The company is subject to 32% income tax.Determine the Cost of Capital (k)Solution:3

Information Provided: Price of the bond = 932.04836 Coupon rate = 7% semi-annually Bond maturity =…

Answered: Determine the Cost of Capital (k)

Business

Finance

Determine the Cost of Capital (k)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section10.A: Mutually Exclusive Investments Having Unequal Lives

Problem 4P

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PLEASE DO THE SOLUTIONS MANUALLY. NOT THRU EXCEL. OTHERWISE DOWNVOTE.

PLEASE SKIP THIS IF YOU ALREADY DID THIS OTHERWISE, DOWNVOTE.

I WILL UPVOTE IF YOU FOLLOW MY INSTRUCTIONS

Problem 3. Mala Prohibita Inc. is evaluating a proposal to acquire a new equipment. The equipment would
require an investment of P417,860, including freight and installation cost of P40,000. It expected to have a 10-
year life with no scrap value at the end of its life. It has been estimated that the new equipment would increase
the company's cash inflows, net of expenses and income taxes by P68,000. The company can issue its 7%
P1,000 par value bond to fund the project. The same type of bond is available in the market at P932.04836 per
bond with interest payable semi-annually for ten years. The company is subject to 32% income tax.
Determine the Cost of Capital (k)
Solution:
3

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