|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
|1||Find the cost of Equity using the Capital Asset Pricing Model (CAPM)|
|2||Find the Weighted Average Cost of Equity (WACC)|
|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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