Name Capital Budgeting Worksheet
l. Your company currently has a debt-to-total assets ratio of 0.35. Additionally, your company has a tax rate of 32%, a beta of 1.2, and no preferred stock outstanding. Your company's bonds have a 5% coupon rate, a yield to maturity rate of 8.5% and mature in 5 years. Currently, a five-year Treasury note is yielding 1.25% and the historic return on the S&P 500 is 11.5 percent. What is our company's weighted average cost of capital (WACC)?
2. Find the NPV,IRR, Payback Period, Discounted Payback Period, Profitability Index, and MIRR (assuming that funds are reinvested at WACC) for the following projects. Use the WACC found in question one. Year 0 Project A -250 Projects Year 1 Year 2 Year 3 Year 4 Year 5 0 0 100 500 1,000 300 Project B -600 100 150 150 100 50 50 50 50 50 Project C 150 Project A Project B Project C NPV IRR. MIRR. Payback Period Discounted Payback Accept or Reject
3. If the projects were independent, which project(s) should you invest in? If the company followed your advice, how much value would be added to the company?
4. If the projects were mutually exclusive, which project(s) should you invest in? If the company followed your advice, how much value would be added to the company?