Finance Report: WACC, Cost of Capital, and Capital Structure Analysis
VerifiedAdded on 2022/09/01
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Report
AI Summary
This report analyzes the weighted average cost of capital (WACC) for a company considering a new investment, specifically the launch of a low-cost electronic security device. The report calculates the cost of equity, cost of debt, and the WACC based on the provided information and ratios. The cost of equity is calculated to be 4.70%, and the cost of debt is 2.64% after tax adjustments. The WACC is calculated to be 3.83%, which is lower and indicates a higher market value. The report concludes that the company should maintain its existing capital structure, showing the inverse relationship between cost and market value. References supporting the calculations are also included.
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