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Calculation of WACC and Net Present Value for Business Finance

Answering questions related to Quick Investments Ltd's bonds and corporate tax rate.

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Added on  2022-10-02

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This report analyzes the calculation of WACC and net present value for business finance. The WACC is 5.4% whereas the net present value is $2200019.77. The report also discusses the concept of the time value of money and internal rate of return. The cash flows of the mining project are presented in the form of the table for the period of 5 years. The annual cash flows have been arrived at after taking into consideration the value of the sale and the other costs. The cost of restoring and the feasibility expenses have been deducted whereas the value of the depreciation has been reduced for the benefit of the tax purpose. The rent as an opportunity cost has also been reduced to get a clear picture of the annual cash expenses.

Calculation of WACC and Net Present Value for Business Finance

Answering questions related to Quick Investments Ltd's bonds and corporate tax rate.

   Added on 2022-10-02

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Running head: BUSINESS FINANCE 1
BUSINESS FINANCE
Calculation of WACC and Net Present Value for Business Finance_1
Running head: BUSINESS FINANCE
Table of Contents
Overview....................................................................................................................... 3
Question 1: Calculation of WACC........................................................................................ 3
WACC....................................................................................................................... 4
Question 2: Calculation of Net present value...........................................................................4
Cash flow................................................................................................................... 5
Net present value.......................................................................................................... 5
Conclusion..................................................................................................................... 7
References..................................................................................................................... 8
Calculation of WACC and Net Present Value for Business Finance_2
Running head: BUSINESS FINANCE
Overview
In this report two sections have been analyzed in detail, one is the section of the working capital,
whereas once is the section of net present value. The calculation of the cost of the capital and the
net present value will give an idea of how the capital budgeting techniques are implemented
(Lam, 2016).
Question 1: Calculation of WACC
Calculation of WACC
Cost of bonds Working
s Market value cost
Weigh
ts
allotte
d
Outstanding bonds
20000
00
Face value 100 90.56
$
181,115,976.90
Coupon rate 2.50%
semi
annual
Number of years maturity 4.00
Number of coupons 2.00
Total value of coupons 5.00%
3.50
% 0.8750
3.06
%
Yield to maturity 7.00%
Tax rate 30%
Preference shares
No of shares
20000
00
$
3,000,000.00
Share price 2.5
Annual dividend 0.25
10.00
% 0.0145
0.14
%
Issue price 1.5
Ordinary shares
Share price
50000
00
$
22,882,109.00
Expected annual dividend 0.75 4.58
Calculation of WACC and Net Present Value for Business Finance_3

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