Business, 14.07.2019 00:00 randall10

Photochronograph corporation (pc) manufactures time series photographic equipment. it is currently at its target debt-equity ratio of .45. it's considering building a new $55 million manufacturing facility. this new plant is expected to generate aftertax cash flows of $7.4 million in perpetuity. there are three financing options: a. a new issue of common stock: the required return on the company's new equity is 15 percent. b. a new issue of 20-year bonds: if the company issues these new bonds at an annual coupon rate of 7 percent, they will sell at par. c. increased use of accounts payable financing: because this financing is part of the company's ongoing daily business, 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.)

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Photochronograph corporation (pc) manufactures time series photographic equipment. it is currently a...

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