Question
Update the spreadsheet by adding the financing component (calculation of WACC) for the model. In other words, instead of the model simply having an input
Update the spreadsheet by adding the financing component (calculation of WACC) for the model. In other words, instead of the model simply having an input that is the value of "r," users should input information about the capital structure of the firm, the cost of debt, the cost of equity for the firm, the weight of each, and WACC should be calculated and used in the calculations of the model. Cost of Equity 13% Cost of Debt 8.50% Weight of Equity 50% Weight of Debt 50%
Initial Cost $100,000 Annual Revenues $81,155 Annual Costs (Excluding Depreciation) $20,000 Year 3 Overhaul $15,390 Year 6 Clean-up Costs $17,690 Equipment Salvage/Book Value $10,000 Useful Life 6 years r (this was not provided in 2.3) 0.1 Tax Rate 0.35 Equipment Sold For $20,000
I calculated r correctly WACC correctly but the teacher says "r," users should input information about the capital structure of the firm, the cost of debt, the cost of equity for the firm, the weight of each, and WACC should be calculated and used in the calculations of the model." WACC is to be utilized instead of r.
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