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Problem 10 : The MacBurger Company , a chain of fast-food restaurants , expects to earn $ 200 million after taxes for the current year . The company has a policy of paying out half of its net after-tax income to the holders of the company ’ s 100 million shares of common stock . A share of common stock of the company current sells for eight times current earnings . Management and outside analysts expect the growth rate of earnings and dividends for the company to be 7.5 percent per year . Calculate the cost of equity capital to this firm .
Spreadsheet Problem 1 : The benefits and costs of an investment project ( the purchase of a piece of machinery ) are those given in the following table . In excel , calculate the net revenue , or the revenue from the investment minus the costs ; the present value coefficient for every year , and the present value of the net revenue . Add together column F to get the net present value of the project . Should the firm purchase the machine ?
Problem 10 : The MacBurger Company , a chain of fast-food restaurants , expects to earn $ 200 million after taxes for the current year . The company has a policy of paying out half of its net after-tax income to the holders of the company ’ s 100 million shares of common stock . A share of common stock of the company current sells for eight times current earnings . Management and outside analysts expect the growth rate of earnings and dividends for the company to be 7.5 percent per year . Calculate the cost of equity capital to this firm .
Spreadsheet Problem 1 : The benefits and costs of an investment project ( the purchase of a piece of machinery ) are those given in the following table . In excel , calculate the net revenue , or the revenue from the investment minus the costs ; the present value coefficient for every year , and the present value of the net revenue . Add together column F to get the net present value of the project . Should the firm purchase the machine ?