FILLER TEXT750 – 1000 words
FILLER TEXTRespond to the following scenario with your thoughts, ideas, and comments. Be substantive and clear, and use research to reinforce your ideas.
Mary Francis has just returned to her office after attending preliminary discussions with investment bankers. Her last meeting regarding the intended capital structure of Apix went well, and she calls you into her office to discuss the next steps.
â€œWe will need to determine the required return for our intended project so that we have a decision criteria defined for the project,â€ she says.FILLER TEXTâ€œDo you have the information I need to describe capital structure and to calculate the weighted average cost of capital (WACC)?â€ you ask.FILLER TEXTâ€œI do,â€ she smiles. â€œWe can determine the target WACC for Apix Printing Inc., given these assumptions,â€ she says as she hands you a piece of paper that says the following: Weights of 40% debt and 60% common equity (no preferred equity)
A 35% tax rate
Cost of debt is 8%
Beta of the company is 1.5
Risk-free rate is 2%
Return on the market is 11% â€œGreat,â€ you say. â€œThanks.â€FILLER TEXTâ€œBe sure to indicate how these costs of capital might be used to determine the feasibility of the capital project,â€ Mary says. â€œI want your recommendation about which is more appropriate to apply to project evaluation, too. Let me know what you think.â€FILLER TEXTâ€œOne more thing,â€ she says as she stands up to signal the end of the meeting. â€œYou did a good job with the explanations that you provided Luke the other day. Would you have time to define marginal cost of capital for me so I can include it in my discussions with investors? You seem to have a knack for making things accessible to nonfinancial folks.â€ FILLER TEXTâ€œNo problem,â€ you say. â€œIâ€™m glad my explanations are so useful!â€ FILLER TEXT
For this assignment, complete the following:
Describe capital structure.
Determine the WACC given the above assumptions.
Indicate how these might be useful to determine the feasibility of the capital project.
Recommend which is more appropriate to apply to project evaluation.
Define FILLER TEXT
Please submit your assign