Sign In Sign Up Ask an AI advisor
makeithappen60
makeithappen60
16.03.2020 • 
Business

You have the following information about Burgundy Basins, a sink manufacturer.Equity shares outstanding 20 millionStock price per share $40.00Yield to maturity on debt 7.5%Book value of interest-bearing debt $320 millionCoupon interest rate on debt 4.8%Market value of debt $290 millionBook value of equity $500 millionCost equity of capital 14%Tax rate 35%Burgundy is contemplating what for the company is an average-risk investment costing $40 million and promising an annual ATCF of $6.4 million in perpetuity.What is the internal rate of return on the investment? (hint: use the equation for a perpetuity)What is Burgundy’s WACC?If undertaken, would you expect this investment to benefit shareholders? Why and why not?

Solved
Show answers

Ask an AI advisor a question

I want advice