You are the head of the acquisitions department of a company. A potential investment in Peltier Devices, Inc (PDI) is currently under review. The following information regarding the company is available. PDI is a private company that imports small dehumidifiers that remove excess moisture from the air, and sells them domestically. The product works well for small rooms and closets. The technology is based on the Peltier effect whereby an electrified junction between two materials emit or absorb heat, and is not proprietary. The firm has a first mover advantage, which will likely erode over time. The firm has been in operation for two years. Below is some information about the projections.
Cash flow projections:
			Year 1	Year 2	Year 3	Year 4	Year 5
Future cash flows			$300	$1,448	$965	$808	$1,948
Assumptions:
Beta			1.28
Cost of debt			4%
Market equity risk premium			5%
E/V			80.00%
D/V			20.00%
Risk-free rate			3.00%
Tax rate			40%
Terminal value*			$41,335
Terminal date			Year 5
*The terminal value of a company is the present value at a future date of all future cash flows expected once the company reaches perpetual stable growth. This amount must be discounted at the same discount rate as the other cash flows to determine its current present value. Hence, this amount should be considered as a projected cash flow amount at the terminal date. The terminal value of a company is covered in more depth in Module 7.
Answer the following questions based on this information in the corresponding answer tabs provided:
Question 1
Calculate the weighted average cost of capital (WACC) for PDI.
Question 2
Calculate the discounted cash flow value for PDI.
Question 3
Use your calculated answers to advise the board on the feasability of the investment by interpreting the results with reference to risk and return.

Answer #1 , Please use the below template and answer with the clarity

Calculate the weighted average cost of capital (WACC) for PDI.
					For facilitator use only
E/V
Cost of equity
	Risk-free rate
	Beta
	Market equity risk premium
D/V
Cost of debt
Corporate tax rate
WACC
					-

Answer # 2 please use the below template

Calculate the discounted cash flow value for PDI.
								For facilitator use only
Assumptions
Discount rate (calculated in answer to Question 1)
Terminal value
Free cash flow projection
	Calculations End of Year 0	Year 1	Year 2	Year 3	Year 4	Year 5
Free cash flow
Present value of FCF
Sum of FCF PV
Terminal value
Present value of terminal value
Total value of PDI
								-

Answer #3

Please

Use your calculated answers to advise the board on the feasability of the investment by interpreting the results with reference to risk and return.

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