Require Return for Capital Funding Suppose that Smith Company is considering a new project. They are trying to determine the required rate of return for their debt and equity holders. See the information below:A 7.5% percent annual coupon bond with 20 years to maturity, selling for 104 percent of par. The bonds make semiannual payments. What is the before tax cost of debt? If the tax rate is 40%, what is the after-tax cost of debt?The firm’s beta is 1.2. The risk-free rate is 4.0% and the expected market return is 9%. What is the cost of equity using CAPM?12/31/2018 12/31/2017 12/31/2016 12/31/2015
Current Assets
Cash And Cash Equivalents
Short Term Investments
Net Receivables
Inventory
Other Current Assets
Total Current Assets
8,719,000 10,607,000 9,157,000 9,095,000
270,000 8,897,000 6,966,000 2,912,000
7,140,000 7,021,000 6,693,000 6,436,000
3,126,000 2,944,000 2,722,000 2,719,000
2,042,000
43,000
31,000
730,000
21,297,000 29,512,000 25,569,000 21,892,000
2,407,000
2,039,000
1,949,000
2,310,000
Goodwill
Intangible Assets
Other Assets
Total Assets
17,587,000
14,806,000
15,823,000
5,122,000
77,042,000
17,237,000
14,741,000
13,835,000
910,000
78,274,000
16,590,000
14,429,000
13,432,000
635,000
72,604,000
16,316,000
14,176,000
13,080,000
749,000
68,523,000
Current Liabilities
Accounts Payable
7,211,000
6,724,000
6,157,000
5,545,000
Long Term Investments
Property Plant and Equipment
Short/Current Long Term Debt
Other Current Liabilities
Total Current Liabilities
3,951,000 4,017,000 4,400,000 3,108,000
6,601,000 4,112,000 3,870,000 3,882,000
17,763,000 14,853,000 14,427,000 12,535,000
Long Term Debt
Other Liabilities
Total Liabilities
28,293,000 33,793,000 30,052,000 29,591,000
12,611,000 14,522,000 11,102,000 10,466,000
58,667,000 63,168,000 55,581,000 52,592,000
Stockholders’ Equity
Total Stockholder Equity
18,375,000 15,106,000 17,023,000 15,931,000
12/31/2018
12/31/2017
12/31/2016
12/31/2015
51,728,000
23,502,000
28,226,000
57,902,000
25,340,000
32,562,000
56,519,100
25,399,800
31,119,300
56,488,000
25,283,000
31,205,000
19,184,000
9,042,000
20,706,000
11,856,000
21,225,600
9,893,700
20,736,000
10,469,000
Other Income/Expenses Net
Interest Expense
Income Before Tax
-1,148,000
1,220,000
6,674,000
-1,507,000
1,288,000
9,061,000
-1,508,400
1,207,800
7,177,500
-2,256,000
853,000
7,360,000
Income Tax Expense
Net Income
2,696,000
3,978,000
4,130,000
4,931,000
1,956,600
5,220,900
1,708,000
5,652,000
Revenue
Total Revenue
Cost of Revenue
Gross Profit
Operating Expenses
Selling General and Administrative
Operating Income or Loss
Income from Continuing Operations
Project A
Project B
Project C
Year 0
-100,000
-250,000
-500,000
Year 1
50,000
100,000
400,000
Year 2
30,000
100,000
50,000
Year 3
30,000
50,000
50,000
Year 4
20,000
50,000
50,000
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