ASS5.xlsx

# ASS5.xlsx - #1 WACC(Weighted Average Cost of Capital =(1...

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#1 WACC (Weighted Average Cost of Capital) = Market value of WTC Book value of debt Corporate tax rate Total Market Value Expected return on stock Expected Return on Bonds = yeild to maturity beta Expect Market Return risk WACC #2 a) If calculate the NPV using equity, we will use this formula ( NPVe = SUM[( ( ?? _ ? )/ + ? ( ?? _ ? )/ ? (1 −? _ ? ) ( ?? _ ? )/ + ? ( ?? _ ? )/ ? (1 −? _ ? )

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The company will pay more cost in each year, and it result more successfu If calculate the NPV using debt, we will use this formula ( NPVd = SUM[((a Finding the required rate of return, we make this two equation equal to e The company should only use the WACC if the company's new prodect ha and financing the expansion using the same mix of debt and equity as the b) This project will have no effect on the NPV of the current project because The company can use CAPM to find discount rate and find the basset of th In this case we cannot use WACC unless the company's new product has s financing expanion using the same mix of debt and equity.
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• Spring '08
• Mohr

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