CALCULATION OF THE COMPANY`S WEIGHTED AVERAGE COST OF CAPITAL

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CALCULATION OF THE COMPANY`S WEIGHTED AVERAGE COST OF CAPITAL

You work in the finance division of the GWS manufacturing company ltd. The company is in the process of deciding whether or not to purchase a new conveyor belt. Your company`s chief financial officer has asked you to prepare a report on this potential project and to make a recommendation as to whether or not the company should proceed with the project.

Your report should include the following:

1. Calculation of the company`s weighted average cost of capital.
2. Explanation of the cricumstances in which it would be appropriate to use the company`s WACC as the discount rate in evaluating the project.
3. Calculation of the net present value of the project.(Round this value to the nearest dollar.)
4. Calculation of the internal rate of return of the project. (Round this value to 2 decimal places.)
5. Calculation of the payback period of the project. (Round this value to 2 decimal places.)
6. Explanation of which of these methods should be used to evaluate the project.
7. Your recommendation as to whether or not th project sholud proceed.