Weighted Average Cost of Capital

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A project requires an initial investment of £130,000. It has been estimated that the project will yield cash flows of £50,000 in for the next 2 years and a
year 3 cash flow of £70,000.
The company considering this is financed is the following way (Tax is 20%):
Ordinary shares: 1.5m shares of 50p nominal value. The shares have a current P0 of 195p. A dividend of 6p has just been paid (the dividend 5 years
ago was 3p).
Bank Loan: £1,950,000 at 5% interest.
Bonds: £1,400,000 of 7% irredeemable bonds (par value) which have a market price of £105.26 (the coupon has just been paid).
Required:
(a) Calculate the WACC. (10 marks)
(b) Calculate the NPV of the project and recommend whether or not it should be accepted. (5 marks)
(c) Comment on the weaknesses of using WACC as a discount rate and therefore in the evaluation of projects. (Max word count is 100 words)
(d) Compare and contrast the different characteristics of equity and debt finance. (Max word count is 100 words) (5 marks)

The book cautions Finch that since Vice-President of Advertising is a hazardous position and that to spare the circumstance, he needs a splendid thought. Bud Frump guilefully reveals to Finch his thought for a broadcast treasure chase. Finch cherishes the thought, unconscious that Biggley has just heard the thought already and dismissed it. Finch discloses to Rosemary the thought, who reacts by revealing to Finch that she cherishes him. (“Glad To Keep His Dinner Warm (Reprise)”). Hedy discloses to Biggley that she is troubled as a secretary and is stopping. Biggley implores her to remain and reveals to her he cherishes her (“Love From a Heart of Gold”). In the official washroom, Finch gives himself a motivational speech before the gathering while, despite his good faith, Frump guarantees different administrators Finch’s introduction will slump, and they plot against him (“I Believe In You”).

25.

Finch presents his concept of the broadcast treasure chase to Biggley: he will shroud 5,000 portions of organization stock in every one of the ten workplaces around the nation and give the crowd week by week pieces of information regarding where they are found. Biggley doesn’t care for the thought, until Finch clarifies that each piece of information will be given by the negligibly dressed World Wide Wicket Treasure Girl: Hedy LaRue.

During the principal TV program, Hedy is advised to swear on a Bible that she doesn’t have a clue about the area of the prizes. Biggley had in truth disclosed to Hedy the areas the earlier night and Hedy alarms, uncovering the areas to the whole TV crowd. This prompts all the Wicket representatives to destroy the workplaces searching for them. The book discloses to Finch that on the off chance that he is the reason for the catastrophe, to re-read the principal part on the best way to go after a position.

The officials, including Chairman of the Board Wally Womper, are trusting that Finch will turn in his abdication. Finch reveals to Rosemary that he will most likely come back to washing windows, however Rosemary guarantees him that she will at present love him regardless (“I Believe in You (Reprise)”). Bud shows up to take Finch to the workplace. Similarly as Finch is going to sign his letter of renunciation, uncovers to the administrators that he was in reality a window washer before going to the organization. Womper is attracted to Finch as he, as well, was a window washer. Finch skilfully accuses the fortune chase for Frump, likewise referencing to Womper that Frump is Biggley’s nephew. Womper is going to fire all the administrators when Finch steps in for everybody’s benefit, disclosing to Finch him that despite the fact that the business world is a spot loaded up with disloyalty and seriousness, the World Wide Wicket staff resembles a family to him (“Brotherhood of Man”). All the administrators are saved, Bud Frump, be that as it may, is terminated.

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26.

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