Discussion Post: Financial Managment
Part A: WACC
Part A has two sections: Ai and Aii. For Ai, you will be valuing the debt and equity of a firm and then computing a WACC. A firm can have many forms of debt, bonds, notes, long-term loans, etc. When firms use a variety of debt instruments, all have to be considered in the WACC computation. However, for this course, we are simplifying this calculation by limiting the debt of our firm to one bond calculation. Also, to calculate the after-tax cost of debt, please assume our company has total business interest expense less than 30% of adjusted taxable income. You may use the formula: AT kd = BT kd * (1 - ISTR). To prepare for calculating the WACC, you will need to complete each step listed on the spreadsheet. The final step is the calculation of the WACC.
For Aii, you will use the WACC you calculated to compute the payback, NPV, IRR, and MIRR of two Capital Budgeting Projects, then explain which projects should be accepted.
Part B: CAPM
For Part B, you will compute a WACC using the risk-adjusted method (CAPM) to determine the cost of equity.
The response must include a reference list. One-inch margins, double-space, Using Times New Roman 12 pnt font and APA style of writing and citations.