TÍNH WACC

- Cost of Capital = 75% of revenue

- SG&A = 5% of revenue
- Tax rate = 40%
- Straight-line depreciation ( over the six year life) with
zero salvage value
- Net Working capital = 10% annual revenue
- Depreciation charges begin after the total $18 million
outlay and machinery starts the service

*Calculate Ks : Cost of Equity :

- B ( beta ) = 1.1
- Krf = 4.60% ( government bonds 10 years )
- Risk premium = 6%
Ks = Krf + B x (Km – Krf)
= 4.6% + 1.1 x (6%)
= 11.2 %
*Calculate Kd : Cost of Debt :
Kd = Bank loan payable + Long term debt
= $500 + $2500
= $3000
500 2500
Kd = 3000
x ( 5.38 % +1 % ) +
3000
x 5.78 %

= 5.88%
* Kd x ( 1 – Tax ) = 5.88% x ( 1 – 40% ) = 3.528%
*Calculate capital structure : We & Wd
Equity = Current Market share price x Shares outstanding
= 24$ x 500 millions $
= 12000 millions $
Debt = Bank loan payable + Long term debt
= 500$ + 2500$
= 3000$
Equity + Debt = 12000$ + 3000$ = 15000$
We = 12000$ / 15000$ = 0.8 = 80%
Wd = 3000 / 15000 = 0.2 = 20%
 WACC = We x Ks + Wd x Kd x ( 1 – T )
= 0.8 x 11.2% + 0.2 x 3.528% = 9.67%

YEAR CASH INFLOW DISCOUNTED

CASH INFLOW
1 2.88 2.62606
2 4.5 3.7414
3 4.5 3.4115
4 4.5 3.1107
5 4.5 2.8364
6 4.5 2.5863
TOTAL 25.38 18.31236

Net present value (NPV) = Discounted cash flow – Cash

Outflow
= 18.31236$ million – 18$ million
= 0.31236$ million

TÍNH IRR
*Firstly calculate the discounted cash flow by using required
interest reteat 10% and 12% respectively

CASH INFLOW 10% CASH INFLOW 12%

2.618208 2.571552
3.7188 3.5874
3.38085 3.2031
3.0735 2.85975
2.79405 2.5533
2.54025 2.2797
Total discounted cash Total discounted cash
inflow : $18.12566 inflow : $17.0546