Reference no: EM132352363
Question
WACC & Capital Budget Analysis - Based on the inputs below how do you calculate WACC & capital budget analysis for this Base Case using the Net Present Value, Internal Rate of Return, Profitability Index and Payback in years methods, determining whether the project is feasible.
Project Inputs:
WACC - Debt is 70% and Equity is 30% of this firm's capital structure. Interest rate on the debt is 7.5%, firm's tax rate is 22%. Firm's beta is 1.50, Risk Free Rate is 3.0%, Market Return Rate is 9.0%.
Project Investment Outlay, Year 0 - $1,000,000
Project Investment Life - 10 years
Project Depreciation - $100,000 / year
Project Salvage Value - $30,000
Working Capital Base of Annual Sales - 10%
Expected inflation rate per year - 3.0%
Project Tax Rate - 30%
Units sold per year - 40,000
Selling Price per Unit, Year 1 - $40.00
Fixed operating costs per year excluding depreciation - $175,000
Manufacturing (Variable) costs per unit, Year 1 - $30.00