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"Air jet parts inc is now considering that the appropriate discount rate for the new machine should be the cost of capital and would like to...
"Air jet parts inc is now considering that the appropriate discount rate for the new machine should be the cost of capital and would like to determine it. You will assist in the process of obtaining this rate. Compute the cost of the debt. Assume air jet is considering issuing new bonds from one of the main competitors as a benchmark. Key competitors include Raytheon, Boeing, Lockheed martin, and Northrop Grumman Corporation. A. what is the ytm of the competitor bond? Use Morningstar find the ytm of one 15 or 20 year bond with the highest possible creditworthiness. you may assumed that the new bond issued by air jet parts are a similar risk and will require the same return b. what is the after tax cost of debt if the tax rate is 34%. C. explains other methods you could use to find the cost of the debt for air jet. D. explains why you should use the ytm and not the coupon rate as a required return of debt.2. compute the cost of common equity using the CAPM model for beta use the average beta of three selected competitor you may use betas from yahoo finance. Assume the risk rate of 3% and the market premium to be 4%. A is the cost of common equity? b. explain the advantages, and disadvantages to use the CAPM model as the method to compute the common cost of equity compare and contrast this method with the dividend growth model approach. 3. Compute the cost of preferred equity assuming the dividend paid for preferred stock is 2.93 and current value is 50.00 per share. A. what is the cost of preferred equity? B. is there any other methods to compute the cost? explain4. Assuming that the market value weigh of these capital sources is 30%bonds 60%common equity and 10%perferred equity what is the weighted capital of the firm? 5. Should the firm use this WAAC for all projects? Explain and provide examples as appropriate. 666. Recomputed the npv of the projects based on the cost of capital you found. Do you still believe that your earlier recommendations for accepting or rejecting the project were adequate? Why or why not?"
