\n Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt\u2212equity ratio of .80. It\u2019s considering building a new $50 million manufacturing facility. This new plant is expected to generate aftertax cash flows of $6.2 million in perpetuity. The company raises all equity from outside financing. There are three financing options: 1. A new issue of common stock: The flotation costs of the new common stock would be 8 percent of the amount raised. The required return on the company\u2019s new equity is 14 percent. 2. A new issue of 20-year bonds: The flotation costs of the new bonds would be 4 percent of the proceeds. If the company issues these new bonds at an annual coupon rate of 8 percent, they will sell at par. 3. Increased use of accounts payable financing: Because this financing is part of the company\u2019s ongoing daily business, it has no flotation costs, and the company assigns it a cost that is the same as the overall firm WACC. Management has a target ratio of accounts payable to long-term debt of .15. (Assume there is no difference between the pretax and aftertax accounts payable cost.) What is the NPV of the new plant? Assume that PC has a 35 percent tax rate.\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt\u2212equity ratio of .80. It\u2019s considering building a new $50 million manufacturing facility. This new plant is expected to generate aftertax cash flows of $6.2 million in perpetuity. The company raises all equity from outside financing. There are three financing options: […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_joinchat":[]},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/posts\/74894"}],"collection":[{"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/comments?post=74894"}],"version-history":[{"count":1,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/posts\/74894\/revisions"}],"predecessor-version":[{"id":244118,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/posts\/74894\/revisions\/244118"}],"wp:attachment":[{"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/media?parent=74894"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/categories?post=74894"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/qualityassignments.net\/wp-json\/wp\/v2\/tags?post=74894"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}