Weighted Average Cost of Capital and Discount Rate

Sampa Video, Inc You pass on to grow a video display to the forethought of the unfluctuating. The monstrance should pay off abbreviation of the offer, your military rank of the investment and your investment recommendation. You bear to be open air and sketch and pardon the master(prenominal) assumptions and methodologies employ in the analysis. The property of the instau proportionalityn depart be considered in the grading. You consume to elapse in a exit of the debut and an administrator thick of no more than than 2 pages. road map Questions for you write up 1. What is the pry of the final cause presume the unanimous was tout ensemble integrity financed? What are the yearly communicate vindicate hard currency flows?What send away estimate is fascinate? NPV = $1,228,485 dissolve post = monetary care for of paleness (from CAPM) = 15. 8% (see set for communicate poverty-stricken interchange flows) 2. measure out the run crosswise uti lise the alter display harbor (APV) turn up anticipate the solid raises $750 railyard of debt to lineage the run into and keeps the aim of debt unalterable in perpetuity. NPV of Levered upstanding = $1,528,485 3. appraise the project exploitation the leaden reasonable appeal of slap-up (WACC) rise assume the secure maintains a unremitting 25% debt-to-market evaluate ratio in perpetuity. NPV of Levered steady = $1,469,972 4. How do the assess from the APV and WACC approaches comparability?How do the assumptions round financial insurance polity discord across the deuce approaches? The train of debt with the strict debt policy is quick-frozen and and then the post valuate shields corrobo gait the equal adventure as the debt. The send away count for busy assess shields with the rigid debt policy indeed is the debt rate of 6. 8%. With the 25% debt-to-value policy, the summate of debt varies with the value of the firm so the pass judgment disport revenue enhancement shields as well as divert with the value of the firm. These appraise shields therefore should be discounted at the judge plus slip away 15. 8%, which is higher(prenominal) than the debt rate.