ALL WORK FOR THIS ASSIGNMENT IS TO BE DONE IN EXCEL ONLY.NO OTHER DOCUMENT FORMAT WILL BE ACCEPTABLE.INDIVIDUAL WORK IS ONLY ACCEPTABLE.
FINAL PROJECT PRACTICE
- Define WACC and what components comprise WACC. You are to complete the WACC for your company. You should include your calculation for CAPM, after-tax debt rate, weights for the financing based on current trading value. You should show each component in Excel with formulas and do not forget that Yahoo finance has much of this information along with Bank Rate.com and the 10-K.(30 points)
- Define capital budgeting. What makes a good decision criteria for capital budgeting?Define IRR and NPV.Standard Grounds Co. is presented with the following two mutually exclusive projects.The required return is 9%. (10 Points)
For each problem, provide a 1-2 sentence explanation of each answer, which will have points for each question.
- What is the IRR, NPV, payback and indifferent point for each project?Which, if either, of the projects should the company accept?
- Sumo Corp. has come up with a new product, the Exacter Freezer.Sumo paid $167,000 for the marketing survey to determine the viability of the product. It is felt that the product will generate sales of $575,000 per year.The fixed cost associated with the project will be $162,000 per year, and the variable costs will amount to 14.5% of sales.The equipment necessary for production will cost $650,000 and will be depreciated on straight-line over five years with no residual value.Sumo is in a 20% tax return and the required rate of return is 26%.Calculate the payback period, NPV and IRR as well as the indifference point.Keep in mind that you will need to build a simple income statement to determine after-tax net income and then derive quick cash flow to calculate the requirements. (10 points)
- What are the three view of market efficiency and which one do you believe in?A stock has an expected return of 13% with a beta of 1.25 and a risk free rate of 2.6%.What is the risk-adjusted return on equity? (10 points)
