WACC and Corporate Investment Decisions
Purpose of Assignment Students should understand corporate risk and be able to
use the financial models learned in the class to evaluate and calculate a company's
weighted average cost of capital and use the analysis to make company investment
decisions. About Your Signature Assignment This signature assignment is
designed to align with specific program student learning outcome(s) in your
program. Program Student Learning Outcomes are broad statements that describe
what students should know and be able to do upon completion of their degree. The
signature assignments may be graded with an automated rubric that allows the
University to collect data that can be aggregated across a location or
college/school and used for program improvements. Assignment Steps Resources:
Tutorial help on Excel® and Word functions can be found on the
Microsoft Office website. There are also additional tutorials via the web that
offer support for office products. Scenario: Wilson Corporation (not real) has a
targeted capital structure of 40% long term debt and 60% common stock. The debt
is yielding 6% and the corporate tax rate is 35%. The common stock is trading at
$50 per share and next year's dividend is $2.50 per share that is growing by 4% per
year. Prepare a minimum 700-word analysis including the following:
capital. Use the dividend
Calculate the company's weighted average cost of
discount model. Show calculations in Microsoft® Word.
The company's CEO has stated if the company increases
the amount of long term debt so the capital structure will be 60% debt and 40%
equity, this will lower its WACC. Explain and defend why you agree or disagree.
Report how would you advise the CEO. Format your paper consistent with APA
guidelines. Click the Assignment Files tab to submit your assignment.
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