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Word document in APA style + references of 700–1,000 words

    Word document in APA style + references of 700–1,000 words with attached Excel Spreadsheet showing calculationsBe sure to document your paper with in-text citations, credible sources, and list of references used in proper APA format.Weekly tasks or assignments(Individual or Group Projects) will be due by Monday, and late submissionswill be assigned a late penalty in accordance with the late penalty policyfound in the syllabus. NOTE: All submission-posting times are based onmidnight Central Time.Key AssignmentYour final assignment as afinancial management intern is to apply the knowledge that you acquired whileengaging in the cost of capital and capital budgeting discussion you had withyour colleagues. In this task, you will be evaluating a capital project usingthe weighted cost of capital for a firm using the market value rather thanthe book value of the components and the capital budgeting techniquespresented in this phase.First, recalculate theweighted average cost of capital (WACC) using the market value of equity todetermine are more realistic cost of capital. You will need to visit a Website to get the current value of the common stock price per share andmultiply this value times the most recent number of shares of common stockoutstanding. In this exercise, you will be ignoring preferred stock because itsweight value will most likely be too low to impact the final result. You mayuse the following table to complete this portion of the task:CompanyCommonStock, price per shareNumberof Common Shares OutstandingMarketValue of Common EquityNow, you can estimate thetotal market value of the company by adding the book value of totalliabilities to the market value of the firm’s common equity and determinetheir market value weights.CompanyTotalLiabilitiesMarketValue of Common EquityMarketValue of the FirmValuesWeightsUsing the cost of eachcomponent as determined in the Phase 4 IP, calculate the firm’s market valueWACC.After-TaxCost of DebtCostof Common EquityWACCUnweightedCostMarketWeight of ComponentMarketWeighted Cost of ComponentThe firm is consideringinvesting in a capital project that will have an initial cost of $12million. The project is expected to have a productive life of 5 years,and at the end of this period, it is expected to have a salvage value of $2million. The net value of the project will be depreciated using thestraight-line method for the full 5 years. The project is expected toincrease the firm’s revenue by $10 million per year, and related expenses(not including depreciation) are expected to increase by about $6.5million per year.The first thing you need todo is calculate the annual depreciation. Feel free to use the followingtable:Initial Investmentless Salvage ValueDepreciable ValueLife of Project(years)Depreciation/yearNow, you need to calculatethe relevant cash flows for the project. You can use the average tax ratethat was calculated in Phase 4 to determine the additional taxes the firmwill have to pay. The following template may be of some assistance to you:Years012345Initial Investment(negative)Increase inRevenueLess Increase inOperating ExpensesIncrease inOperating IncomeLessDepreciation/yearTaxable IncomeLess Taxes atAverage RateNet IncomePlusDepreciation/yearOperating CashFlowPlus Salvage Value(Year 5)Relevant CashFlows (0–5)At this point, you areready to apply the capital budgeting techniques of net present value (NPV)and the internal rate of return (IRR). To calculate the NPV, use themarket-value WACC as your discount rate and the required rate of return forIRR.• After completing the requiredcalculations, explain your results in a Word document, and attach thespreadsheet showing your work. Be sure to explain the following:◦ Based on your calculations, would yourecommend approving or rejecting the project, and why?◦ Why would you expect both NPV and IRRto support the same conclusion to accept or reject the project?◦ If you employed a cost of capital of20%, would you have made the same accept or reject decision, and why?◦ What are some of the advantages anddisadvantages of the 2 methods (NPV and IRR), and under what circumstances isone more reliable over the other?◦ Why is operating cash flow used incapital budgeting and not net income?Be sure to document yourpaper with in-text citations, credible sources, and list of references usedin proper APA format.

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