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Evaluation of four independent investments

Corporation is evaluating the following four independent, investment opportunities:
Project A, Cost $300,000, Rate of return 14%
Project B, Cost $150,000, Rate of return 10%
Project C, Cost $200,000, Rate of return 13%
Project D, Cost $400,000, Rate of return 11%

Jackson's target capital structure is 60 percent debt and 40 percent equity. The yield to maturity on the company's debt is 10 percent. Jackson will incur floatation costs for a new equity insurance of 12 percent. The growth rate is a constant 6 percent. The stock price is currently $35 per share for each of the 10,000 shares outstanding. Jackson expects to earn net income of $100,000 this coming year and the dividend payout ratio will be 50 percent. If the company's tax rate is 30 percent, which of the projects will be accepted?

I'm confused with this one, can work some of the problem but not all. If you can show me the work in excel, I'd be greatly appreciative.

Solution Preview

The investment opportunities can be selected based on the return. The return offered by the projects should be higher than the cost of capital. In order to decide which project to choose, we first need to ...

Solution Summary

The solution explains how to make accept reject decisions for independent projects.