Energy Costs Find information on energy cost: Advantages (government websites) 2 – Cost of Equity, Appropriate Discount Rate (WACC) Cost of equity 1. Formula Risk Free Rate + (Market Premium x Overall Company Beta) 2. Each part a. Risk free rate (10-year T-bill) i. bond rating chosen * interest rate * b. Market premium c. Beta i. Appropriate Discount Rate (WACC) 1. Formula Weight of Debt x After-Tax Cost of Debt) + (Debt to Equity x Cost of Equity) 2.
WACC (important – why is it important for the company, Tesca, to know this? ) 3. Each part (optional) a. Weigh of debt b. After-tax cost of debt c. Debt to equity d. Cost of equity 3- Recommended Generator 1. Comparing the two models: a. Warranty Cost Spreadsheet 4 – Cash Flow For Next Twenty Years and Assumptions Fundamentals factors affecting cost of money: (page 19 of the textbook) 1. 2. 3. 4. Production opportunities Time preferences for consumption Risk Inflation 5 – Capital Budgeting Techniques
Capital budgeting techniques: (page 411 of the textbook) 1. 2. 3. 4. 5. 6. NPV IRR MIRR PI Payback Discount payback 7 – Evaluation of NPV’s Sensitivity Analysis Based on the sensitivity analysis graph you will need to explain it. (page 436-439) 8 – Recommendations For or Against Which of the two models should the company choose? If none of them are a good decision for the company, then explain why? When referring to Exhibit in your paper Example: Please refer to Exhibit 1, which shows………………………. Please refer to Exhibit
The Essay on Debt and Equity
Long-term financing requires a meticulous understanding of the various features of debt and equity and their impact an organization. While evaluating debt and equity, an investment banker also has to consider the unique characteristics of the organization’s dealings while ensuring that the organization’s requirements are met. Debt CapitalDebt capital includes all long-term borrowing ...
