Common Stock, price per share
Word document of 700–1,000 words with attached Excel Spreadsheet showing calculations.
Weekly tasks or assignments (Individual or Group Projects) will be due by Monday, and late submissions will be assigned a late penalty in accordance with the late penalty policy found in the syllabus. NOTE: All submission posting times are based on midnight Central Time.
Key Assignment
Your final assignment as a financial management intern is to apply the knowledge that you acquired while engaging in the cost of capital and capital budgeting discussion you had with your colleagues. In this task, you will be evaluating a capital project using the weighted cost of capital for a firm using the market value rather than the book value of the components and the capital budgeting techniques presented in this phase.
First, recalculate the weighted average cost of capital (WACC) using the market value of equity to determine are more realistic cost of capital. You will need to visit a Web site to get the current value of the common stock price per share and multiply this value times the most recent number of shares of common stock outstanding. In this exercise, you will be ignoring preferred stock because its weight value will most likely be too low to impact the final result. You may use the following table to complete this portion of the task:
Company
Common Stock, price per share
Number of Common Shares Outstanding
Market Value of Common Equity
At this point, you are ready to apply the capital budgeting techniques of net present value (NPV) and the internal rate of return (IRR). To calculate the NPV, use the market-value WACC as your discount rate and the required rate of return for IRR.
After completing the required calculations, explain your results in a Word document, and attach the spreadsheet showing your work. Be sure to explain the following:
Based on your calculations, would you recommend approving or rejecting the project, and why?
Why would you expect both NPV and IRR to support the same conclusion to accept or reject the project?
If you employed a cost of capital of 20%, would you have made the same accept or reject decision, and why?
What are some of the advantages and disadvantages of the 2 methods (NPV and IRR), and under what circumstances is one more reliable over the other?
Why is operating cash flow used in capital budgeting and not net income?
Be sure to document your paper with in-text citations, credible sources, and list of references used in proper APA format.
Word document of 700–1,000 words with attached Excel Spreadsheet showing calculations.
Weekly tasks or assignments (Individual or Group Projects) will be due by Monday, and late submissions will be assigned a late penalty in accordance with the late penalty policy found in the syllabus. NOTE: All submission posting times are based on midnight Central Time.
Key Assignment
Your final assignment as a financial management intern is to apply the knowledge that you acquired while engaging in the cost of capital and capital budgeting discussion you had with your colleagues. In this task, you will be evaluating a capital project using the weighted cost of capital for a firm using the market value rather than the book value of the components and the capital budgeting techniques presented in this phase.
First, recalculate the weighted average cost of capital (WACC) using the market value of equity to determine are more realistic cost of capital. You will need to visit a Web site to get the current value of the common stock price per share and multiply this value times the most recent number of shares of common stock outstanding. In this exercise, you will be ignoring preferred stock because its weight value will most likely be too low to impact the final result. You may use the following table to complete this portion of the task:
Company
Common Stock, price per share
Number of Common Shares Outstanding
Market Value of Common Equity
At this point, you are ready to apply the capital budgeting techniques of net present value (NPV) and the internal rate of return (IRR). To calculate the NPV, use the market-value WACC as your discount rate and the required rate of return for IRR.
After completing the required calculations, explain your results in a Word document, and attach the spreadsheet showing your work. Be sure to explain the following:
Based on your calculations, would you recommend approving or rejecting the project, and why?
Why would you expect both NPV and IRR to support the same conclusion to accept or reject the project?
If you employed a cost of capital of 20%, would you have made the same accept or reject decision, and why?
What are some of the advantages and disadvantages of the 2 methods (NPV and IRR), and under what circumstances is one more reliable over the other?
Why is operating cash flow used in capital budgeting and not net income?
Be sure to document your paper with in-text citations, credible sources, and list of references used in proper APA format.
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