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Comprehensive Project for WACC and NPV Company A is considering a 4 - year project. They own a piece of land that could be sold
Comprehensive Project for WACC and NPV
Company A is considering a year project. They own a piece of land that could be sold for $ They hired an engineer to evaluate it and she has approved it for building a new factory. The engineer billed the company for $ Building a new factory will cost $ and the new product is estimated to result in $ in annual sales. It will reduce the sales of the existing product by $ and it will have an annual cost of $ The project will be depreciated straight line to $ over years, and it will have a salvage value at the end of the project of $ For this project the company will issue a bond and it will cost the company $year in interest. The factory also requires an initial investment in spare parts inventory of $ along with an additional $ in inventory for each succeeding year of the project. The company's tax rate is
This company also has $ shares of common stock outstanding. The current share price is $ and the book value per share is $ This company also has two bond issues outstanding. The first bond issue has a face value of $ has a coupon, matures in years and sells for percent of par. The second issue has a face value of $ has a coupon, matures in years, and sells for percent of par.
The most recent dividend was $ and the dividend growth rate is Both bonds make semiannual payments.
The risk free rate is and his company has a beta of The return of the market is
This project is considered to be riskier than the companys existing operations and the company evaluates riskier projects by adding a premium to its WACC.
Calculate the NPV and the IRR of this Project. Should the company take this project?
Please help with the excel sections attached in the photo.
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