Question
4. A firm has projected the following financials for a possible project: YEAR 0 1 2 3 4 5 Sales 121,841.00 121,841.00 121,841.00 121,841.00 121,841.00
4. A firm has projected the following financials for a possible project:
| YEAR | 0 | 1 | 2 | 3 | 4 | 5 |
|---|---|---|---|---|---|---|
| Sales | 121,841.00 | 121,841.00 | 121,841.00 | 121,841.00 | 121,841.00 | |
| Cost of Goods | 68,545.00 | 68,545.00 | 68,545.00 | 68,545.00 | 68,545.00 | |
| S&A | 30,000.00 | 30,000.00 | 30,000.00 | 30,000.00 | 30,000.00 | |
| Depreciation | 20,696.80 | 20,696.80 | 20,696.80 | 20,696.80 | 20,696.80 | |
| Investment in NWC | 1,132.00 | 524.00 | 524.00 | 524.00 | 524.00 | 524.00 |
| Investment in Gross PPE | 103,484.00 |
The firm has a capital structure of 45.00% debt and 55.00% equity. The cost of debt is 8.00%, while the cost of equity is estimated at 13.00%. The tax rate facing the firm is 40.00%. (Assume that you can't recover the final NWC position in year 5. i.e. only consider the change in NWC for each year)
What is the WACC for the project?
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Finance And Industrial Policy
Authors: Giovanni Cozzi, Susan Newman, Jan Toporowski
1st Edition
0198744501, 978-0198744504
