Business Finance

See attachedÂ

## Instructions

INSTRUCTIONS | |

Complete the Cost of Capital tab | |

oÂ Â Find the cost of Equity using the Capital Asset Pricing Model (CAPM) | |

oÂ Â Find the Weighted Average Cost of Capital (WACC) | |

Complete the Payback tab | |

oÂ Â Complete the After-tax Cash Flow re-evaluation table | |

oÂ Â Complete the DCF Payback timeline | |

oÂ Â Complete the questions on the tab | |

Complete the Budget Projections tab | |

oÂ Â Revenue increases 4% annually | |

oÂ Â Expense increases 2Â¾% annually | |

## Cost of Capital

Instructions: | |||||||||||

1 | Find the cost of Equity using the Capital Asset Pricing Model (CAPM) | ||||||||||

2 | Find the Weighted Average Cost of Equity (WACC) | ||||||||||

1 | |||||||||||

RF | êžµ | RM | = CAPM | ||||||||

————————————– | |||||||||||

2 | |||||||||||

E | |||||||||||

D | |||||||||||

Total Capital (V) | $ – 0 | ||||||||||

Last Fiscal Year End Interest Expense | |||||||||||

Tax Rate (TC) | |||||||||||

1. Find the weight of equity = E / (E + D). | |||||||||||

2. Find the weight of debt = D / (E + D). | |||||||||||

Re | 3. Find the cost of equity using CAPM. | ||||||||||

Rd | 4. Find the cost of debt. | ||||||||||

WACC | 5. Find the weighted average cost of capital. | ||||||||||

WACC Information from Largo Global

a. As of today, Largo Global market capitalization (E) is $6,373,341,000.1

b. Largo Global’s Market value of debt is $761,000,000.

c. Cost of Equity = CAPM from question 1

d. Cost of Debt = Last Fiscal Year EndÂ Interest Expense2Â / Market Value of Debt (D).

e. Use the tax rates given in Project 4 Tab 3.

_________

1 Market value of equity (E), also known as market cap, is calculated using the following equation:

Market Cap = Share Price x

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