ASSIGNMENT #$1$

DEVELOP A WEIGHTED COST OF CAPITAL AND BUDGET

FOR A COMPANY

Title: Capital Budget Management

Overview: In this project, you will develop a cost of capital for a hypothetical company. You will be required to prepare a budget for a project being considered as part of capital budgeting. A written report will be submitted by all students that explains how you arrived at your cost of capital and budget.

Instructions:

Part $1$: Developing a Cost of Capital

$1.$ You will create your own hypothetical company.

$2.$ Estimate the cost of equity for the company. Explain how you arrived at your estimate

$3.$ Estimate the company cost of debt. Explain how you arrived at your estimate.

$4.$ Calculate the weighted average cost of capital $($WACC$)$: Using the cost of equity and cost of debt, calculate the WACC for the company. Explain how you arrived at your estimate of the weights for equity and debt.

$5.$ Discuss any limitations or assumptions made in calculating the WACC: Explain any limitations or assumptions made in your calculations and how they may impact the accuracy of your cost of capital.

Part $2$: Analyzing Hypothetical Project

$1.$ Analyze the project budget and describe how the project will help the company.