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I need help on how to evaluate a project using the WACC and what discount rate should be applied when evaluating the project??? The project
I need help on how to evaluate a project using the WACC and what discount rate should be applied when evaluating the project???
The project is Hansson Private Label Case, IF you google Hanson private label case pdf, you will find the pdf file of the case and all the information about it
Here is some data from the project:
Exhibit 7: Cost of Capital Analysis Company: Cathleen Sinclair General Health & Beauty Women's Care Company Skin Care Enterprises Average Debt/ Value 81.6% 16.5% 10.0% 23.6% 32.9% Debt/ Equity 444.9% 19.8% 11.1% 30.9% 49.1% Equity Beta 2.22 1.95 1.14 1.35 1.67 Debt Beta 0.25 0.00 0.00 0.00 0.06 Asset Beta 0.79 1.74 1.07 1.14 1.18 Debt/ Value 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Debt/ Equity 0.0% 5.3% 11.1% 17.6% 25.0% 33.3% Asset Beta 1.18 1.18 1.18 1.18 1.18 1.18 Equity Beta 1.18 1.22 1.26 1.31 1.36 1.42 Cost of Equity 9.67% 9.86% 10.07% 10.30% 10.56% 10.86% Cost of Debt WACC 7.75% 9.67% 7.75% 7.75% 9.53% 7.75% 9.45% 7.75% 9.38% 7.75% 9.31% Assumptions: 10-Year Treasury Market Risk Premium 3.75% 5.00% Tax Rate 40.0% Est. Hansson EBITDA Multiple Est. Hansson Enterprise Value 7.0x 514.5 Existing Net Debt Plus: New Expansion Debt Total Estimated Debt 49.8 57.8 107.6 Existing D/V Estimated New D/V 9.7% 20.9% Assumed Debt Beta Estimated Cost of Debt 0.00 7.75%
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