FINANCE HELP ASAP
1. Part A: Compute the Weighted Average Cost of Capital (WACC). Points: 10 DEBT Category DEBT Amount Weight Interest % Weighted Cost Long-Term Debt 1990 Bond 1998 Bond 2007 Bond 2011Bond $ $ $ $ 25,000,000.00 15,000,000.00 17,000,000.00 17,550,000.00 8.25% 7.90% 9.00% 9.00% WACD Equity Preferred Stock Common Stock Retained Earnings $ $ 9.00% 6.00% 11,000,000.00 25,000,000.00 $ 65,000,000.00 10.50% WACE WACC TotalDebt/Equity $ 175,550,000.00 Hint: Part C PVIF 1- Part B: A thinking question: What steps can Senior Management take to lower the WACC in this problem, discuss what you could do in a separate discussion explaining your action(s) that change the WACC in question # 1-A. Points: 25 1 - Part C: Compute the NPV Costs for a NEW project approved by Senior management and the Board of Directors, should the corporation lease or purchase a $500K dollar machine. What are you choosing? Lease? Own/Purchase? 15 points Cost of Owning Year 0 Year 1 Year 2 Year 3 Year 4 Net Purchase -$500,000.00 Maintenance Tax Saving Dep Tax Saving Residual Value Residual V Tax Net Cashflow PV @?? -$12,000.00 -$12,000.00 - $12,000.00 -$12,000.00 -$12,000.00 $2,500.00 $2,500.00 $2,500.00 $2,500.00 $16,000.00 $25,600.00 $15,200.00 $9,600.00 $20,000.00 $5,600.00 Cost of Leasing $45,500.00 $22,800.00 Lease Payment Tax Savings Net Cashflow PV @?? Lease $45,500.00 $45,500.00 $45,500.00 $22,800.00 $22,800.00 $22,800.00 Owning Leasing Net Comparison 1. Part A: Compute the Weighted Average Cost of Capital (WACC). Points: 10 DEBT Category DEBT Amount Weight Interest % Weighted Cost Long-Term Debt 1990 Bond 1998 Bond 2007 Bond 2011Bond $ $ $ $ 25,000,000.00 15,000,000.00 17,000,000.00 17,550,000.00 8.25% 7.90% 9.00% 9.00% WACD Equity Preferred Stock Common Stock Retained Earnings $ $ 9.00% 6.00% 11,000,000.00 25,000,000.00 $ 65,000,000.00 10.50% WACE WACC TotalDebt/Equity $ 175,550,000.00 Hint: Part C PVIF 1- Part B: A thinking question: What steps can Senior Management take to lower the WACC in this problem, discuss what you could do in a separate discussion explaining your action(s) that change the WACC in question # 1-A. Points: 25 1 - Part C: Compute the NPV Costs for a NEW project approved by Senior management and the Board of Directors, should the corporation lease or purchase a $500K dollar machine. What are you choosing? Lease? Own/Purchase? 15 points Cost of Owning Year 0 Year 1 Year 2 Year 3 Year 4 Net Purchase -$500,000.00 Maintenance Tax Saving Dep Tax Saving Residual Value Residual V Tax Net Cashflow PV @?? -$12,000.00 -$12,000.00 - $12,000.00 -$12,000.00 -$12,000.00 $2,500.00 $2,500.00 $2,500.00 $2,500.00 $16,000.00 $25,600.00 $15,200.00 $9,600.00 $20,000.00 $5,600.00 Cost of Leasing $45,500.00 $22,800.00 Lease Payment Tax Savings Net Cashflow PV @?? Lease $45,500.00 $45,500.00 $45,500.00 $22,800.00 $22,800.00 $22,800.00 Owning Leasing Net Comparison
