- Top rated Essay Writing Service. Hire our expert essay writers today!
- +1 (470) 465-4219
- support@academicessayist.com
Weighted Average Cost of Capital Problem
| ORDER # | 100033 |
| PAPER TYPE | MATH PROBLEMS |
| WRITING LEVEL | UNDERGRADUATE |
| WRITING STYLE | APA |
| # OF SOURCES | 2 |
| # OF QUESTIONs | 1 |
Weighted Average Cost of Capital Problem Description
Scenario: You work for an investment banking firm and have been asked by management of Vestor Corporation (not real), a software development company, to calculate its weighted average cost of capital, to use in evaluating a new company investment. The firm is considering a new investment in a warehousing facility, which it believes will generate an internal rate of return of 11.5%. The market value of Vestor’s capital structure is as follows:
| Source of Capital | Market Value |
| Bonds | $10,000,000 |
| Preferred Stock | $2,000,000 |
| Common Stock | $8,000,000 |
To finance the investment, Vestor has issued 20 year bonds with a $1,000 par value, 6% coupon rate and at a market price of $950. Preferred stock paying a $2.50 annual dividend was sold for $25 per share. Common stock of Vestor is currently selling for $50 per share and has a Beta of 1.2. The firm’s tax rate is 34%. The expected market return of the S&P 500 is 13% and the 10-Year Treasury note is currently yielding 3.5%.
Determine what discount rate (WACC) Vestor should use to evaluate the warehousing facility project.
Show all calculations.
Grading Rubric
| Excellent (4) | Good (3) | Needs Improvement (2) | Poor (1) | |
| Accuracy of solution | Solution has no errors and very few grammatical errors. Very well written and excellent use of business language. | Solution has a few errors. Few grammatical errors that don’t affect meaning. Well written and use of business language is acceptable. | Solution has errors. Some grammatical errors but generally don’t affect meaning. Language is satisfactory overall but use of more appropriate business language is required. | Solution has numerous errors. Numerous grammatical errors that affect meaning. Language used is unprofessional and not appropriate for business use. |
| Solution Organization and Formatting | Relevant sections are included, and each is organized effectively. Formatting is professional and consistent and includes all required elements. | Relevant sections are included but could be a little better organized. Formatting is acceptable and/or one or two required elements are missing. | Relevant sections are included but organization could be improved. Formatting is inconsistent and/or many elements are missing or not formatted appropriately. | Sections are missing and/or poorly organized. Formatting is messy and unprofessional. |
| Solution workings /Thinking | Solution workings are comprehensive and detailed. Thinking and ideas are presented clearly, are engaging and thorough. | Solution workings are sufficient. Thinking and ideas are clear but could be expanded to be more thorough. | Solution workings are fairly basic and/or thinking and ideas lack some clarity and depth. | Solution workings are very basic and thinking and ideas are superficial and lack clarity. |
To get solution for your Weighted Average Cost of Capital Problem, please click on https://academicessayist.com/orders/ordernow
