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Please, need help with this exercise. Thank you in advance. It is necessary to make an investment of CZK 1,200,000, which will generate the EBITDA
Please, need help with this exercise. Thank you in advance.
It is necessary to make an investment of CZK 1,200,000, which will generate the EBITDA in the annual amount of CZK 400,000 during next 3 years annually o The project will not hold any initial working capital, but it is expected to keep 15% EBITDA in the NCWC capital, which will be released in the end. Tax is 20%. o Discount factor is based on following parameters: A company has a beta of 1,25 and its target leverage is 30 %. The yield to maturity on the company's bonds is 7 % pa. What is the company's weighted average cost ofcapital if the risk-free rate is 3 % and the market risk premium is 4%? o In the end of second year investment can be sold for CZK 650 000 o Company is using the straight-line method for depreciation with useful life 5 years for each investment with no salvage value. 3. Straight line depreciation method for 4 years is using a) Evaluate the project if it is worth to accept it using ANNUITY b) What is the MAXIMUM REQUIRED RETURN for the project to be acceptable? c) Will this project bring the ECONOMIC VALUE ADDED for the company It is necessary to make an investment of CZK 1,200,000, which will generate the EBITDA in the annual amount of CZK 400,000 during next 3 years annually o The project will not hold any initial working capital, but it is expected to keep 15% EBITDA in the NCWC capital, which will be released in the end. Tax is 20%. o Discount factor is based on following parameters: A company has a beta of 1,25 and its target leverage is 30 %. The yield to maturity on the company's bonds is 7 % pa. What is the company's weighted average cost ofcapital if the risk-free rate is 3 % and the market risk premium is 4%? o In the end of second year investment can be sold for CZK 650 000 o Company is using the straight-line method for depreciation with useful life 5 years for each investment with no salvage value. 3. Straight line depreciation method for 4 years is using a) Evaluate the project if it is worth to accept it using ANNUITY b) What is the MAXIMUM REQUIRED RETURN for the project to be acceptable? c) Will this project bring the ECONOMIC VALUE ADDED for the companyStep by Step Solution
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