Using market value and book value (separately), find the adjusted wacc, using 30% tax rate.

Instructions
Instructions
1. You have three problems - one on each tab of this Excel file.
2. Please show your work in the cells. Use Excel formulas instead of writing the values/answers directly in the cell.
The instructor will then know where you made a mistake and provide you valuable feedback and partial credit (if appropriate).
3. It is recommended to watch the assigned videos in week # 4.
Total Points: 10
Problem 1 NPV
Calculate the NPV for each project and determine which project should be accepted.
Project A Project B Project C Project D
Initial Outlay (105,000.00) (99,000.00) (110,000.00) (85,000.00)
Inflow year 1 53,000.00 51,000.00 25,000.00 45,000.00
Inflow year 2 50,000.00 47,000.00 55,000.00 50,000.00
Inflow year 3 48,000.00 41,000.00 15,000.00 30,000.00
Inflow year 4 30,000.00 52,000.00 21,000.00 62,000.00
Inflow year 5 35,000.00 40,000.00 35,000.00 68,000.00
Rate 7% 10% 13% 18%
NPV =
Answer:
Refer to the Solved Example 9.2 on pg. 265 of your text.
Problem 2 Payback
Your company is considering three independent projects. Given the following cash flow information, calculate the payback period for each.
If your company requires a three-year payback before an investment can be accepted, which project(s) would be accepted?
Project D Project E Project F
Cost 205,000.00 179,000.00 110,000.00
Inflow year 1 53,000.00 51,000.00 25,000.00
Inflow year 2 50,000.00 87,000.00 55,000.00
Inflow year 3 48,000.00 41,000.00 21,000.00
Inflow year 4 30,000.00 52,000.00 9,000.00
Inflow year 5 24,000.00 40,000.00 35,000.00
Payback Period
Answer:
Refer to the Solved Example 9.1 on pg. 259 of your text.
Calculations
Year 1
Year 2
Year 3
Year 4
Year 5
Formulas
Year 1
Year 2
Year 3
Year 4
Year 5
Problem 3 WACC
Using market value and book value (separately), find the adjusted WACC, using 30% tax rate.
Component Balance Sheet Value Market Value Cost of Capital TAX
Debt 5,000,000.00 6,850,000.00 8% 30%
Preferred Stock 4,000,000.00 2,200,000.00 10%
Common Stock 2,000,000.00 5,600,000.00 13%
Refer to the Solved Example 7 on Page 334 of your text.
ANSWER
Book Value Weights Market Value Weights Adjusted WACC
Debt Debt Market Value
Preferred Stock Preferred Stock Book Value
Common Stock Common Stock