hw 1681889 2

Landmark, Inc. hired you as a consultant to help them estimate their cost of capital.  You have been provided with the following data:  its most recently paid dividend is $1.30; its current market price is $46.50; its ROE = 10% and its dividend payout ratio is 35%.  New common stock will have an 8% flotation cost.  Based on the DCF approach and the Retention Growth Model, what is the cost of equity from new common stock?

 

Gamma Enterprises, Inc. has a WACC of 15.75% and is considering a project that requires a cash outlay of $1,600 now with cash inflows of $650 at the end of year 1, $600 at the end of year 2, $725 at the end of year 3, and $750 at the end of year 4.  What is the project’s profitability index?

 

Beta Enterprises, Inc. has a WACC of 12% and is considering a project that requires a cash outlay of $1,250 now with cash inflows of $495 at the end of Year 1, $575 at the end of Year 2, and $800 at the end of Year 3.  What is the project’s discounted payback?