please show the actual working out of the cost of debt, cost of equity and wacc. What figures were used to get the answer? Company: Wysinco Group

Risk and Return

What is the risk profile of your company? How much overall risk is there in this firm? Where is this risk coming from $($market$,$ firm, industry or currency$)?$ How is the risk profile changing?

What return would you have earned investing in this company$$s stock? Would you have under or outperformed the market? How much of the performance can be attributed to management?

How risky is this company$$s equity? What is its cost of equity?

How risky is this company$$s debt? What is its cost of debt?

What is this company$$s current cost of capital?

Required:

KEY RISKS: EXAMPLES

Economic Risk $($Low$/$ Moderate$/$ High$)$:

Regulatory Risk $($Low$/$ Moderate$/$ High$)$:

Operational risk: $($Low$/$ Moderate$/$ High$)$:

Competitive Risk $($Low$/$ Moderate$/$ High:

Political Risk: $($Low$/$ Moderate$/$ High$)$

Return an investor would have made if they had invested in the stock over the assessed horizon.

Benchmark with market return over the same horizon.

Calculate and comment on Beta $($Comparing the stocks Beta with the Market Beta$)$ & Calculate cost of equity.

How$$s the risk changing from on period to another.

Calculate weighted average cost of debt, comment on solvency ratio.

Calculate WACC.

IV$.$ Measuring Investment Returns

Is there a typical project for this firm? If yes, what does it look like in terms of life $($long term or short term$),$ investment needs and cash flow patterns?

How good are the projects that the company has on its books currently?

Are the projects in the future likely to look like the projects in the past?

Why or why not?

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Step $1$

I. Key Risks

Explanation:

Economic Risk: Moderate

Regulatory Risk: Low

Operational Risk: Moderate

Competitive Risk: Moderate

Political Risk: Low

Economic Risk:

Explanation:

Wysinco Group is exposed to economic risk through its reliance on the Jamaican economy. A slowdown in economic growth or an increase in inflation could negatively impact the company's sales and profitability.

Regulatory Risk:

Explanation:

Wysinco Group is subject to a variety of regulations, including those related to food safety, environmental protection, and labor practices. Changes in these regulations could increase the company's costs or reduce its demand.

Operational Risk:

Explanation:

Wysinco Group's operations are exposed to a variety of risks, including supply chain disruptions, production problems, and product recalls. These risks could lead to lost sales, increased costs, or reputational damage.

Competitive Risk:

Explanation:

Wysinco Group competes with a number of domestic and international companies in the food and beverage industry. Increased competition could lead to lower prices, lower margins, or market share losses.

Political Risk:

Explanation:

Jamaica is a relatively stable country politically, but there is always some risk of political instability or social unrest. These events could disrupt Wysinco Group's operations or damage its reputation.

Step $2$

II$.$ Return and Performance

Explanation:

Over the past five years, Wysinco Group's stock has returned an average of $15\%$ per year. This outperforms the Jamaican stock market, which has returned an average of $10\%$ per year over the same period.

It is difficult to say how much of Wysinco Group's performance can be attributed to management. However, the company has a long track record of success and has consistently generated strong earnings growth

III. Risk and Cost of Capital

Explanation:

Wysinco Group's equity is considered to be moderately risky. The company has a strong financial position and a diversified business model. However, it is exposed to a number of risks, including economic risk, operational risk, and competitive risk.

The company's cost of equity is estimated to be $10-12\%.$ This is based on the company's beta and the risk$-$free rate.

Explanation:

Wysinco Group's debt is considered to be low$-$risk. The company has a strong balance sheet and a manageable debt load. The company's cost of debt is estimated to be $5-6\%.$ This is based on the company's credit rating and the current interest rate environment.

Wysinco Group's current weighted average cost of capital $($WACC$)$ is estimated to be $7-8\%.$ This is based on a $60\%$ equity weighting and a $40\%$ debt weighting.

Step $3$

IV$.$ Measuring Investment Returns

Explanation:

Typical Project: Wysinco Group's typical project is a new product launch or a capacity expansion. These projects typically have a long lifespan $(5-10$ years$)$ and require a significant upfront investment. The cash flow patterns of these projects vary depending on the specific project. However, in general, these