Use the WACC you calculated for Vandelay Industries as the required rate of return for assessing the four projects (automatically linked).

WACC = 0.00%

Calculate each project's NPV.

NPV A NPV B NPV C NPV D

Net Present Value =

If the projects are independent, what is your recommendation?

Accept or Reject?

If the projects are mutually exclusive, what is your recommendation?

Accept or Reject?

Calculate each project's IRR.

IRR A IRR B IRR C IRR D

Internal Rate of Return =

If the projects are independent, what is your recommendation?

Accept or Reject?

If the projects are mutually exclusive, what is your recommendation?

Accept or Reject?

In the space below, confirm your recommendation of the four mutual exclusive projects. Give support for your answer.

Questions WACC Projects Vandelay Industries is considering four average risk projects with information below related to their rates of return. Determine Vandelay Industries' WACC. INPUTS USED IN THE MODEL Tax rate B-T rd Net Pps Dps DI 40% 8% $35.00 $5.00 $50.00 $2.50 5% 0.8 8.25% 3.0% 55% 15% 30% Vandelay's beta Market risk premium, RPM Risk free rate, rRF Target capital structure from common stock Target capital structure from preferred stock Target capital structure from debt Calculate the cost of each capital component, that is, the after-tax cost of debt, the cost of preferred stock (including flotation costs), and the cost of equity (ignoring flotation costs). Use both the the CAPM method and the dividend growth approach to find the cost of equity. Cost of debt: B-T rd (1-) = A-T rd Cost of preferred stock (including flotation costs): Dpf Net Ppf = rpf Cost of common equity, dividend growth approach (ignoring flotation costs): DI PO + g = rs Cost of common equity, CAPM: rRF + bx RPM rs Vandelay Industries will continue to use the same capital structure, what is the company's WACC? wd wps 30.0% 15.0% 55.0% 100.0% WS wd * A-T rd + wpf x rpf + wsts = WACC Questions WACC Projects Vandelay Industries is considering four average risk projects with information below related to their rates of return. Determine Vandelay Industries' WACC. INPUTS USED IN THE MODEL Tax rate B-T rd Net Pps Dps DI 40% 8% $35.00 $5.00 $50.00 $2.50 5% 0.8 8.25% 3.0% 55% 15% 30% Vandelay's beta Market risk premium, RPM Risk free rate, rRF Target capital structure from common stock Target capital structure from preferred stock Target capital structure from debt Calculate the cost of each capital component, that is, the after-tax cost of debt, the cost of preferred stock (including flotation costs), and the cost of equity (ignoring flotation costs). Use both the the CAPM method and the dividend growth approach to find the cost of equity. Cost of debt: B-T rd (1-) = A-T rd Cost of preferred stock (including flotation costs): Dpf Net Ppf = rpf Cost of common equity, dividend growth approach (ignoring flotation costs): DI PO + g = rs Cost of common equity, CAPM: rRF + bx RPM rs Vandelay Industries will continue to use the same capital structure, what is the company's WACC? wd wps 30.0% 15.0% 55.0% 100.0% WS wd * A-T rd + wpf x rpf + wsts = WACC