I need cost of debt and after tax cost of debt and the WACC. If needed the semi anual coupon rate is 6.9% and tax rate is 34%.
in yellow and Formula/Function Inputs are highlighted in blue) I. Given the following data on proposed capital budgeting project. (Numerical Inputs Expected from you are highlighted in yellow and Formula/Function Note Cells C21 and C22 include t Column D through Giare t The new Designer Eyewear was expected to sell for $116 per unit and had projected sales of 4700 units in the first year, with a projected (Most-Likely scenario) 25.0% growth rate per year for subsequent years. A total investment of $744,000 for new equipment was required. The equipment had fixed maintenance contracts of $311,845 per year with a salvage value of $ 126,185 and variable costs were 8% of revenues. Sundar also needed to consider both the Best-Case and Worst-Case: scenarios in the analysis with growth rates of 35.00% and 2.50% respectively. The new equipment would be depteciated to xero using straight line depreciation. The new projoct required an increase in working capital of $240,080 and $40,814 of this increase would be offset with accounts payable. PSUWC currently has 1095000 shares of stock outstanding at a current price of $85.00. Even though the company has. outstanding stock, it is not poblicly traded and therefore there is no pablicly available financial information. Howeve, after analysis management believes that its equity beta is 1.55 . The company also has 97000 bonds outstanding, with a current price of $976.00. The bondt pay interest semi-annually at a coupon rate of 6.90%. The bonds have a par value of $1,000 and will mature in 13 years, the average corporate tax rate was 34% Management believes the SAP 500 is a reasonable proxy for the market portfolio. Therefore, the cost of equity is calculated using the conspary's equity beta und the market risk premium based on the S\&P 500 annual expected nate of return - Sundar would calculate the monthly expected market return uaing 5 ycars of past monthly price data available in the worksheet. Markeidata. This would then be multiplied by 12 to estimate the annual expected rate. Sundar remembered that if the expected rate of return for the market was 100 low, too bigh, or negative, a forward looking rate of an historical average of about 9.5% would have to be used, as the calculated value for the current 5 -ycar period may not be represeatative of the future. Sundar would consider a E(Rm) between 8-12\% aceeptable, Suodar would calculate the market risk premium: E(Rm) - Rf from the previous calculations using the risk-ftee rate data available in the worksheet Marketdata. Sunder noted that the risk-free rate was on an arnual basis. Sundar noeded to calculate the rate at which the project would have to be discounted to calculate the Net Present Value (NFV) of the proposed project hased an the dectsion of raising capital and the current capital market environment. This discount rate, the WACC, would obvioully influence the NPV and could affect the decision of whether to accept or reject the project. wources for all purameter estimates ased in the calculation of the WACC (and ultimately the NPV)