FIN 415 help A Clearer path to student success/uophelp.com FIN 415 help A Clearer path to student success/uop | Page 26

·
For each additional unit of debt (each additional $2,000,000), the cost of debt
rises by 0.85%, and the beta of Austin Enterprises rises by 0.025.
Where is the WACC the lowest? Graph the results of the changing WACC
Chapter 12 Problem 17
Working capital and capital budgeting. Farbuck’s Tea Shops is thinking about
opening another tea shop. The incremental cash flow for the first five years is as
follows:
·
Initial capital cost = $3,500,000 Operating cash flow for each year =
$1,000,000 Recovery of capital assets after five years = $250,000
The hurdle rate for this project is 12%. If the initial cost of working capital is
$500,000 for items such as teapots, teacups, saucers, and napkins, should
Farbuck’s open this new shop if it will be in business for only five years? What is
the most it can invest in working capital and still have a positive net present value?
Chapter 13 Problem 18
Working capital and capital budgeting. Working capital investment is 25% of the
anticipated first year sales for Wally’s Waffle House. The first-year sales are
currently projected at $4,300,000. The incremental cash flow (not including
working capital investment) is
·
Initial cash flow = $13,700,000 outflow Cash flow years 1 through 10 =
$2,850,000
What is the internal rate of return of the ten-year project with working capital
factored into the cash flow? What is the net present value at a 15% weighted
average cost of capital? What is the maximum investment in working capital for an
acceptable project with a 15% weighted average cost of capital?
----------------------------------------------------------------
FIN 419 Week 4 Team Assignment Problem Sets
For more course tutorials visit
www.uophelp.com
In case different Questions/problems are asked by your instructor just email me