You have the following information about Burgundy Basins, a sink manufacturer. Equity shares outstanding 20 million
Stock price per share $37
Yield to maturity on debt 5.5%
Book value of interest-bearing debt $340 million
Coupon interest rate on debt 4.2%
Market value of debt $235 million
Book value of equity $390 million
Cost of equity capital 11.4%
Tax rate 35%

Burgundy is contemplating what for the company is an average-risk investment costing $34 million and promising an annual ATCF of $4.7 million in perpetuity.

Required:
a. What is the internal rate of return on the investment? (hint: use the equation for a perpetuity)
b. What is Burgundy’s WACC?
c. If undertaken, would you expect this investment to benefit shareholders? Why and why not?

Which of the following is an effective strategy when interest rates are falling? a. use long-term loans to take advantage of current low rates. b. use short-term loans to take advantage of lower rates when you refinance a loan. c. deposit to a short-term savings instrumentals to take advantage of higher interest rates when they mature. d.select short-term savings instruments to lock in earnings at a current high rates.

Consider the scenario below and let us know if you believe lauren smith's actions to be ethical. let us know why or why not. lauren smith is the controller for sports central, a chain of sporting goods stores. she has been asked to recommend a site for a new store. lauren has an uncle who owns a shopping plaza in the area of town where the new store is to be located, so she decides to contact her uncle about leasing space in his plaza. lauren also contacted several other shopping plazas and malls, but her uncle’s store turned out to be the most economical place to lease. therefore, lauren recommended locating the new store in her uncle’s shopping plaza. in making her recommendation to management, she did not disclose that her uncle owns the shopping plaza. if management decided to go with lauren's uncle's plaza, what additional information would be needed in the financial statements?

Which of the following is an example of a production quota? a. the government sets an upper limit on the quantity that each dairy farmer can produce. b. the government sets a price floor in the market for dairy products. c. the government sets a lower limit on the quantity that each dairy farmer can produce. d. the government guarantees to buy a specified quantity of dairy products from farmers.