24. WACC and APV (S18-1 and S18.4) Take another look at the valuations of Rio in Tables 18.1 and 18.2. Now use the live spreadsheets in Connect to show how Rio’s value depends on:

a. The forecasted long-term growth rate.

b. The required amounts of investment in fixed assets and working capital.

c. The cost of capital. (Note: You can vary the cost of capital in Table 18.1.)

d. Profitability—that is, cost of goods sold as a percentage of sales.

e. The assumed amount of debt financing.

CHALLENGE