Hello,

I am a little bit confused with the calcualtion of WACC for this project.

I ONLY NEED HELP WITH WACC. PLEASE EXPLAIN IN DETAIL HOW YOU CALCULATE THE WACC. THANKS. HOW DO YOU COME UP WITH THIS NUMBER?

Capital Budget Analysis

Based on the inputs below prepare a capital budget analysis for this Base Case using the Net Present Value, Internal Rate of Return, Profitability Index and Payback in Years determining whether the project is feasible.

Project Inputs:

WACC the cost of capital (hurdle rate) will be the current yield of the 10 Year U.S. Treasury Note as of Tuesday July 5, 2016, plus 700 basis points (Please explain how you calculated it in details).

Project Investment Outlay, Year 0 - $400,000

Project Investment Life 10 years

Project Depreciation - $40,000 / year

Project Salvage Value - $10,000

Working Capital Base of Annual Sales 10%

Expected inflation rate per year, Selling Price Per Unit 5%

Expected inflation rate per year, Manufacturing Cost per unit 3.5%

Expected inflation rate per year, Fixed operating costs per year 2.5%

Project Tax Rate 30%

Units sold per year 50,000

Selling Price per Unit, Year 1 - $35

Fixed operating costs per year excluding depreciation - $150,000

Manufacturing costs per unit, Year 1 - $25.20