Calculate the weighted average cost of capital for pdi

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Reference no: EM133633819

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. It has been in operation for two years. Below is some information about the projections.

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.

Question 1 Calculate the weighted average cost of capital (WACC) for PDI.

Reference no: EM133633819

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