Finance - WACC
Not what you're looking for?
MT 217 can manufacture the new PDA for $200 each in variable costs. Fixed costs for the operation are estimated to run $4.5 million per year. The estimated sales volume is 70,000, 80,000, 100,000, 85,000, and 75,000 per each year for the next five years, respectively. The unit price of the new PDA will be $340. The necessary equipment can be purchased for $16.5 million and will be depreciated on a 5 year straight-line schedule.
Net working capital investment for the PDAs will be $6,000,000 this year. Of course NWC will be recovered at the projects end. MT 217 has a 35 percent corporate tax rate.
MT 217 's capital structure is 40% debt with an after-tax cost of 8% and 60% equity costing 16%,
Sherry has asked Doug to prepare a report that answers the following questions:
1. What is MT 217 's WACC, which will be used as the required rate of return for this project?
2. What is the IRR of the project?
3. What is the NPV of the project, based on the WACC (required rate of return)?
Purchase this Solution
Solution Summary
The solution determines the WACC in the given finance question.
Purchase this Solution
Free BrainMass Quizzes
MS Word 2010-Tricky Features
These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.
Six Sigma for Process Improvement
A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.
Social Media: Pinterest
This quiz introduces basic concepts of Pinterest social media
Employee Orientation
Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.