FIN3701 ASSIGNMENT 2 SEMESTER 2 - 2023
UNIQUE NUMBER:
CLOSING DATE: 14 SEPTEMBER 2023
QUESTION 1
REQUIRED:
1.1 Calculate the WACC associated with each range of financing/break-point. (18 marks)
1.2 In which project do you recommend that the company invest its funds? Give motivat...
1.1 Calculate the WACC associated with each range of financing/break-point.
This question assesses your knowledge regarding the application of the various components
of capital, the weighted average cost of capital (WACC) and the weighted marginal cost of
capital (WMCC). You have to know how to calculate the level of total new financing at which
the cost of one of the financing components will rise and in turn casue an upward shift in
the WMCC.
For instance, when the level of total financing rises from the ranges of R0 – R375 000 to
R375 000 – R625 000, the cost of debt changes from 6.37% to 10% and when the level of
total financing changes from the ranges of R375 000 – R625 000 to R625 000 and above, the
cost of equity rises from 14.11% to 11.50%.
CALCULATIONS:
1
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Masters. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $2.99. You're not tied to anything after your purchase.