Finance

posted by .

Suppose you just inherited a gold mine. This gold mine is believed to have three years worth of gold deposit. Here is how much income this gold mine is projected to bring you each year for the next three years:
Year 1: $49,000,000
Year 2: $61,000,000
Year 3: $85,000,000
Compute the present value of this stream of income at a discount rate of 7%. Remember, you are calculating the present value for a whole stream of income, i.e. the total value of receiving all three payments (how much you would pay right now to receive these three payments in the future). Your answer should be one number - the present value for this gold mine at a 7% discount rate.
Help anyone please,,,,,,,

  • Finance -

    Assume that you are the assistant to the CFO of XYZ Company. Your task is to estimate XYZ's WACC using the following data:
    1. The firm's tax rate is 40%.
    2. The current price of the 12% coupon, semiannual payment, non-callable bonds with 15 years to maturity is $1,153.72. New bonds could be issued with no flotation costs.
    3. The current price of the firm's 10% $100 par value, quarterly dividend, perpetual preferred stock is $116.95. The flotation costs on a new issue would be 5% of the proceeds.
    4. The current price of the common stock is $50 per share. The last dividend was $4.19, and dividends are expected to grow at a constant rate of 5%. The firm's beta is 1.2, the yield on T-bonds is 7%, and the market risk premium is 6%.
    5. The target capital structure is 30% long-term debt, 10% preferred stock, and 60% common equity.
    Procedure
    1. What sources of capital should be included when you estimate XYZ's WACC?
    2. Should the component costs be estimated on a before or after-tax basis? Why?
    3. Should the component costs be historical or marginal costs? Why?
    4. What is the market interest rate on XYZ's debt and its component cost of debt?
    5. What is the firm's cost of preferred stock?
    6. Why is the firm's cost of preferred stock lower than the yield to maturity on its debt (Hint: Think about taxes.)

  • Finance -

    Coogly Company is attempting to identify its weighted average cost of capital for the coming year and has hired you to answer some questions they have about the process. They have asked you to present this information in a PowerPoint presentation to the company’s management team. The company would like for you to keep your presentation to approximately 10 slides and use the notes section in PowerPoint to clarify your point. Your presentation should address the following questions and offer a final recommendation to Coogly. Make sure you support your answers and clearly explain the advantages and disadvantages of utilizing the weighted average cost of capital methodology. Include at least one graph or chart in your presentation.

    Company Information

    The capital structure for the firm will be maintained and is now 10% preferred stock, 30% debt, and 60% new common stock. No retained earnings are available. The marginal tax rate for the firm is 40%.

    Coogly has outstanding preferred stock That pays a dividend of $4 per share and sells for $82 per share, with a floatation cost of $6 per share. What is the component cost for Coogly's preferred stock? What are the advantages and disadvantages of using preferred stock in the capital structure?

    If the company issues new common stock, it will sell for $50 per share with a floatation cost of $9 per share. The last dividend paid was $3.80 and this dividend is expected to grow at a rate of 7% for the foreseeable future. What is the cost of new equity to the firm? What are the advantages and disadvantages of issuing new equity in the capital structure?

    The company will use new bonds for any capital project, according to the capital structure. These bonds will have a market and par value of $1000, with a coupon rate of 6% and a floatation cost of 7%. The bonds will mature in 20 years and no other debt will be used for any new investments. What is the cost of new debt? What are the advantages and disadvantages of issuing new debt in the capital structure?

    Given the component costs identified above and the capital structure for the firm, what is the weighted average cost of capital for Coogly? What are the advantages and disadvantages of using this method in the capital budgeting process?

  • Finance -

    The capital structure for the firm will be maintained and is now 10% preferred stock, 30% debt, and 60% new common stock.  No retained earnings are available.   The marginal tax rate for the firm is 40%.

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. geography

    1)give two properties of gold which makes it an economically valuable mineral 2)what is the difference between gold and an ordinary rock?
  2. chem

    How many gold atoms are in an 0.408 ounce, 18 gold bracelet?
  3. CHEMISTRYYYY HELP

    A sample of gold ore contains 22.0 g of gold metal per 100kg of ore. If gold has a market value of $350.00 per oz., what mass of ore, in tons, must be refined to get one million dollars worth of pure gold?
  4. refining

    If I have a solution of gold chloride, is there a was I can grow metalic gold crystals to recover the gold instead of using sulfer dioxide to drop the gold as poeder?
  5. micro economics

    1) Assume that the gold-mining industry is competitive. a) Illustrate a long-run equilibrium using diagrams for the gold market and for the a representative gold mine. b) Suppose that an increase in jewellery demand induces a a surge …
  6. College Chemistry/Lab Math

    I think I have this problem figured out correctly, but is there anyone who can tell me if I'm doing something wrong. The question is... "One troy ounce of gold is worth $380. There are 33.8 grams per troy ounce. You have a stock colloidal …
  7. Calculus

    The cost of producing x ounces of gold from a new gold mine is C=f(x) dollars. Do you think the values of f'(x) will increase or decrease in the short term?
  8. Calculus

    The cost of producing x ounces of gold from a new gold mine is C=f(x) dollars. Do you think the values of f'(x) will increase or decrease in the short term?
  9. Science

    How many number of gold atom are present in 0.6 gm of 18 carat gold.The 24 carat gold is taken as 100% pure gold.(atomic mass of gold=197a.m.u)
  10. finance

    . Suppose you just inherited an gold mine. This gold mine is believed to have three years worth of gold deposit. Here is how much income this gold mine is projected to bring you each year for the next three years: Year 1: $49,000,000 …

More Similar Questions