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Zinn Corp has 3.50 million shares of common stock outstanding
Zinn Corp has 3.50 million shares of common stock outstanding
Zinn Corp. has 3.50 million shares of common stock outstanding. The firm is in steady-state growth, and analysts expect the firm’s earnings and dividends to continue to grow at their historical rate for the foreseeable future—per share dividends on common have grown from $2.00 six years ago to $2.90 today. Each share of Zinn’s common stock is selling for $38.50 today. The firm’s beta is estimated to be 1.85. The long-term Treasury rate is 3.75%, and the expected market risk premium is 6.5%. Analysts estimate that potential equity investors will require a premium of 5.5% over the firm’s bond yield.
The firm’s long-term debt consists of 6.25% coupon bonds, which were issued 8 years ago with an original maturity of 20 years. These bonds pay interest annually. Today, these bonds have a yield of 9.75%. The book value of these bonds is $350 million. Zinn Corp. also has 480,000 shares of perpetual preferred stock outstanding, and these pay a fixed dividend of $7 per year on a face value of $50. Each share of the firm’s preferred currently sells for $79. The firm’s marginal tax rate is 30%. Estimate the firm’s weighted average cost of capital (WACC).
Make sure to show all work clearly. As you set up your table in Excel, please use the order of columns and rows as shown below
| Source | # Securities | Price | Mkt Value | Weight | Pre-Tax Cost | Post-Tax Cost | Wtd Post-Tax |
| Debt | |||||||
| Preferred | |||||||
| Common |
Capital Budgeting and WACC
Capital Budgeting and WACC
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Question 1 (25 Points)
Zinn Corp. has 3.50 million shares of common stock outstanding. The firm is in steady-state growth, and analysts expect the firm’s earnings and dividends to continue to grow at their historical rate for the foreseeable future—per share dividends on common have grown from $2.00 six years ago to $2.90 today. Each share of Zinn’s common stock is selling for $38.50 today. The firm’s beta is estimated to be 1.85. The long-term Treasury rate is 3.75%, and the expected market risk premium is 6.5%. Analysts estimate that potential equity investors will require a premium of 5.5% over the firm’s bond yield.
The firm’s long-term debt consists of 6.25% coupon bonds, which were issued 8 years ago with an original maturity of 20 years. These bonds pay interest annually. Today, these bonds have a yield of 9.75%. The book value of these bonds is $350 million. Zinn Corp. also has 480,000 shares of perpetual preferred stock outstanding, and these pay a fixed dividend of $7 per year on a face value of $50. Each share of the firm’s preferred currently sells for $79. The firm’s marginal tax rate is 30%. Estimate the firm’s weighted average cost of capital (WACC).
Make sure to show all work clearly. As you set up your table in Excel, please use the order of columns and rows as shown below
| Source | # Securities | Price | Mkt Value | Weight | Pre-Tax Cost | Post-Tax Cost | Wtd Post-Tax |
| Debt | |||||||
| Preferred | |||||||
| Common |
Sum WACC=
Question 2 (20 Points)
Better-Rock & Co. is bidding on a contract to supply 85,000 units per year for 3 years of a special type of geophone used in oil exploration. The equipment required to produce these geophones has an installed cost of $4.2 million. An estimated $200,000 will have to be invested initially in net working capital (to be recovered at project end). The equipment will be depreciated on a straight-line basis on a 5-year schedule, and sold at the end of 3 years for an estimated $2.2 million.
Annual fixed operating costs (other than depreciation) are expected to be $320,000. Variable operating costs should amount to 30% of sales revenue. Better-Rock & Co. has a required return of 12% on this project. Its marginal tax rate is 35%. What per-unit price should Better-Rock bid at a minimum?
Question 3 (15 Points)
Clementi Corp. has debt in the form of 8.00% coupon bonds that have 14 years remaining until maturity. These bonds pay interest semiannually, and have a yield of 4.25% at the present time. The book value of these bonds is $125 million. The company’s common stock is currently trading at 88.90 per share. There are 2.25 million shares of Clementi stock outstanding. The firm has no preferred stock. There is insufficient price history for Clementi stock to allow you to estimate the company’s equity beta, so you turn to a comparable firm that has sufficient data.
You use regression analysis to estimate the beta for this comparable firm. Your results suggest a beta of 1.30. In market value terms, the comparable firm has a $298 million of debt and $480 million of equity. Both Clementi Corp. and the comparable firm face a 35% marginal tax rate.
- Estimate the equity beta for Clementi Corp.
- If the risk-free rate is 2.80% and the market risk premium is 6.25%, estimate the required rate of return on Clementi stock.
Question 4 (20 points)
Praeda Inc. has the choice of buying a piece of equipment or leasing it. The purchase cost of the equipment will be $155,000. For tax purposes, the depreciation on the machine will be full, straight-line depreciation over 7 years. The machine will be used for 5 years, regardless of whether it is purchased or leased. The machine is expected to have a market value of $70,250 at the end of the 5 years. The lessor will require annual payments of $21,000. A total of 5 annual payments will be required under the lease contract, with the first payment due immediately (that is, at the start of the first year). The lease will be treated as an operating lease for tax and reporting purposes.
Praeda Inc. pays 6.25% interest on its loans, and its weighted average cost of capital is 8.75%. The company faces a marginal tax rate of 21%.
- What is the cost of leasing?
- What is the cost of borrowing?
- Should Praeda Inc. lease the machine, or should it buy the machine? You must explain your answer in order to get any credit.
(You MUST use the lease-minus-buy approach to answer this question. Make sure to explain your buy/lease decision; don’t limit your answer to just a calculation.) Question 5 (20 points)
A company is evaluating a machine for possible purchase. The estimated price of the machine is $400,000 and an additional $50,000 will be needed for shipping, installing, and getting the machine ready for use. The machine will be depreciated according to the 5-year MACRS class though the company plans to use it for only 3 years. The depreciation rates by year are provided below. The estimated selling price of the machine after the 3 years is $250,000.
If purchased, this machine will necessitate an initial increase in net working capital of $30,000 which is expected to be recovered when the machine is sold. The firm estimates that the acquisition of this machine will boost overall revenue by $145,000 for each year. The new machine is expected to increase operating costs (other than depreciation) by $22,000 for each year. The company’s applicable tax rate is 21%. The firm’s cost of capital is 8%. Estimate the NPV & IRR of this machine, and comment on whether or not the company should invest in it.
MACRS Depreciation Rates for the 5-year Class:-
Year Dep. %
1 20
2 32
3 19.20
4 11.52
5 11.52
6 5.76
COMMUNITY HEALTH AND POPULATION-FOCUSED NURSING
COMMUNITY HEALTH AND POPULATION-FOCUSED NURSING
B. Write your community health nursing diagnosis statement.
• The community health nursing diagnostic statement identifies a health concern or risk, identifies the affected group or community, suggests a cause, and logically discusses the evidence and/or support for the diagnosis.
B1. Explain how the health concern from your community health nursing diagnostic statement is linked to a health inequity or health disparity within the target population.
• The explanation accurately identifies a health inequity or health disparity within the target population and logically discusses how the identified health inequity or disparity is linked to the health concern identified in part B.
B1a. Discuss the primary community resources and primary prevention resources currently in place to address the health concern.
• The discussion appropriately details the primary community resources and the primary prevention resources relevant to the identified health concern.
B1b. Discuss the underlying causes of the health concern.
• The discussion accurately identifies potential contributing factors for the health concern and logically proposes the underlying causes for the health concern based on the identified potential contributing factors.
B2. Discuss the evidence-based practice associated with the Field Experience topic.
• The discussion is logical and appropriately includes the evidence-based practice relevant to the selected Field Experience topic.
B2a. Identify data about the selected Field Experience topic from the local (e.g., county), state, and/or national level.
• The submission logically identifies data that relates to the selected Field Experience topic from the local, state, and/or national level.
C. Develop a community health nursing social media campaign strategy that will convey your health message and address the Field Experience topic by doing the following:
C1. Describe your social media campaign objective.
• The description presents an objective for the social media campaign that can feasibly convey the health message and address the Field Experience topic.
C2. Recommend two population-focused social marketing interventions and justify how each would improve the health message related to your selected
Field Experience topic.
• The justification of 2 recommended social marketing interventions describes how each social marketing intervention is population focused and logically explains how each social marketing intervention would improve the health message related to the selected Field Experience topic.
C3. Describe a social media platform you would use that is appropriate for communicating with the target population.
• The description identifies a social media platform that would be used and includes logical rationale for why the selected social media platform is appropriate for communicating with the target population.
C3a. Discuss the benefits of the selected social media platform in supporting preventative healthcare.
• The discussion logically outlines the benefits of the selected social media platform for supporting preventative healthcare and logically describes how each benefit applies to supporting preventative healthcare.
C4. Discuss how the target population will benefit from your health message.
• The discussion logically outlines the benefit(s) of the health message for the target population and logically describes how the benefit(s) of the health message apply to the target population.
D. Describe best practices for implementing social media tools for health marketing.
• The description identifies best practices that are appropriate and specific for implementing social media tools for health marketing.
E. Create a social media campaign implementation plan by doing the following:
E1. Describe stakeholder roles and responsibilities in implementing the plan.
• The description identifies specific stakeholder roles and responsibilities that are appropriate for the implementation of the social media campaign plan.
E2. Discuss potential public and private partnerships that could be formed to aid in the implementation of your campaign.
• The discussion identifies potential public and private partnerships that could be formed and logically describes how each potential partnership would aid the implementation of the social media campaign plan.
E3. Create a specific timeline for implementing your campaign.
• The timeline for implementing the campaign is realistic and includes specific details related to the implementation of the campaign.
E4. Explain how you will evaluate the effectiveness of the campaign.
• The explanation identifies the tools that are necessary for the evaluation of the campaign, logically describes the criteria for campaign effectiveness, and logically discusses how evaluation tools will be used in the determination of campaign effectiveness
E5. Discuss the costs of implementing your campaign.
• The discussion identifies the specific elements of the social media campaign that would require financial support to implement and logically describes the
potential cost of implementing each of these elements.
F. Reflect on how social media marketing supports the community health nurse’s efforts to promote healthier populations.
• The reflection logically discusses the benefit(s) of using social media marketing for the community health nurse and logically describes one or more
specific examples of how social media marketing supports the community health nurse’s efforts to promote healthier populations.
F1. Reflect on how your social media campaign could apply to your future nursing practice.
• The reflection logically discusses one or more examples of how the social media campaign could apply to the candidate’s future nursing practice.
G. Acknowledge sources, using in-text citations and references, for content that is quoted, paraphrased, or summarized.
H. Demonstrate professional communication in the content and presentation of your submission.
