Capital Budgeting: Lombra Industries

LomBra Industries, Inc. Cost of Capital and Capital Budgeting As she headed toward her bosss office, Amy Tobin, Chief hap Officer for the LomBra Industries Inc., a multinational diversified comp both, wished she could remember a lot of her training in financial theory that she had been exposed to in graduate school. Amy had vindicatory completed summarizing the financial aspects of four upper-case earn investment projects that were open to LomBra Industries during the coming year, and she was faced with the task of recommending which ones should be selected. What concerned her was the knowledge that her boss, Karen Melton, a street smart hotshot executive, with no background in financial theory, would immediately submit the project that promised the quickest payback. Amy knows that selecting projects purely on that basis would be incorrect; but she wasnt sure of her ability to convince Karen, who tended to press in financial analysts thought up fancy methods just to v erbalize how smart they were. The first important issue that Amy must(prenominal) mete out with before she can right(a)ly evaluate any come-at-able slap-up proposals is the appropriate discount consecrate for LomBra Industries. Amy k raw that in the perish board meeting the target nifty structure had been debated to a great extent and the consensus opinion was that the unfluctuating should have 45% in debt, 10% in favourite(a) memory, and 45% in common stock.

Listed infra are more or less of the factors that Amy must consider in deciding on the proper discount rate for the firm, even if supererogato ry external groovy is not used: 1. The! corporate impose rate is 40, percent. 2. only of the following terms would apply to any new capital offerings: a. Debt: The firm has an 8.5% semi-annual coupon rate obligate that has 12 days left to maturity which currently sells for $1,015.00. b. best-loved Stock: LomBras preferred stock has a $100 hit value and pays an annual dividend of $9.50 per share. If new Preferred Stock is issued it testament incur a 8.0% floatation cost....If you want to get a full essay, order it on our website: OrderCustomPaper.com

If you want to get a full essay, visit our page: write my paper