Calculate the AT-WACC

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Reference no: EM132903440

Question - As an Angel Investor you have been asked to assess an entrepreneur's product and financing options. In your role as an Angel Investor you focus on one year at a time. The entrepreneur asks for $100,000 immediately to purchase a diagnostic machine for a healthcare facility. The entrepreneur hopes to be financed with 60 percent debt and 40 percent equity. As the entrepreneurs' venture capital partner, you assign a cost of equity of 15% and a cost of debt at 10%. You require a Return on Investment (ROI) of 8%. You are using an After Tax Weighted Average Cost of Capital (AT- WACC) model. A 35% marginal tax rate is applied.

Required - Calculate the AT-WACC with a 60% debt and 40% equity financing structure and then explain why this is or is not a viable investment for you as the Angel Investor.

Reference no: EM132903440

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