Question:

FINC3304 (BUSINESS FINANCE)

Final Project - Fall 2017

Instruction:

You need to work on the mini-projects in Excel. Your final mini-project report should be well-organized and typed in a Word file. Are required to submit both your Word report and Excel files to the instructor using the mini-project submission tool in Blackboard. The style and organization of the project accounts for 10 points.

Mini-Project 2: Capital Budgeting Analysis (60 points):

A firm is planning a new project that is projected to yield cash inflows of $395,000 in Year 1, $286,000 per year in Years 2 through 5, and $278,000 in Years 6 through 11. This investment will cost the company $1,980,000 today (initial outlay). We assume that the firm's cost of capital is 10%.

(1) Draw a time line to show the cash flows of the project.

(2) Compute the project's payback period, net present value (NPV), profitability index (PI), internal rate of return (IRR), and modified internal rate of return (MIRR).

(3) Discuss whether the project should be taken.

Mini-Project 3: Weighted Average Cost of Capital (80 points):

Find 2017 financial statements for Amazon.Com from UHV Mergent Online database, Yahoo! Finance, Google Finance, or other finance sources.

(1) Estimate the weights of capital (debt, preferred stock, and common stock) for the company.

(2) Estimate the before-tax and after-tax component cost of debt for the firm.

(3) Estimate the component cost of preferred stock (if applicable) for the firm.

(4) Estimate the component cost of common equity using CAPM for the firm.

(5) Compute the firm's weighted average cost of capital (WACC). Discuss your findings.