As the financial manager of Wilmore Company Limited, with a passion to boost employment creation through intraregional tourism in Ghana, you have acquired a land at Ho to put up an exquisite amusement park that features a number of attractions including games, pools, gardens, rides etc. The project will cost a total of GH₵100,000. The following cash flows are expected from the project. The beta of the project is 1.5 and the market return is 15%. The risk-free rate of return is 8%. Year ₵ 0 (100,000) 1 20,000 2 25,000 3 32,000 4 35,000 i. Using the CAPM approach, what is the cost of equity on this project? ii. Wilmore Company Limited is a levered entity with percentage of debt out of total capital being 40%. If the interest rate on a bank loan is 10%, the tax rate is 20%, and the cost of equity is as computed in (a), what will be the after tax cost of debt? iii. What will be the weighted average cost of capital (WACC)?iv. Using the WACC computed in (c), what will be the NPV of the investment? vi. What will be your overall advice concerning viability of the project?

As the financial manager of Wilmore Company Limited, with a passion to boost employment creation through intraregional tourism in Ghana, you have acquired a land at Ho to put up an exquisite amusement park that features a number of attractions including games, pools, gardens, rides etc. The project will cost a total of GH₵100,000. The following cash flows are expected from the project. The beta of the project is 1.5 and the market return is 15%. The risk-free rate of return is 8%. Year ₵ 0 (100,000) 1 20,000 2 25,000 3 32,000 4 35,000 i. Using the CAPM approach, what is the cost of equity on this project? ii. Wilmore Company Limited is a levered entity with percentage of debt out of total capital being 40%. If the interest rate on a bank loan is 10%, the tax rate is 20%, and the cost of equity is as computed in (a), what will be the after tax cost of debt? iii. What will be the weighted average cost of capital (WACC)?iv. Using the WACC computed in (c), what will be the NPV of the investment? vi. What will be your overall advice concerning viability of the project?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 20P

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As the financial manager of Wilmore Company Limited, with a passion to boost employment creation through intraregional tourism in Ghana, you have acquired a land at Ho to put up an exquisite amusement park that features a number of attractions including games, pools, gardens, rides etc. The project will cost a total of GH₵100,000. The following cash flows are expected from the project. The beta of the project is 1.5 and the market return is 15%. The risk-free rate of return is 8%. Year ₵ 0 (100,000) 1 20,000 2 25,000 3 32,000 4 35,000 What will be the weighted average cost of capital (WACC)?
As the financial manager of Wilmore Company Limited, with a passion to boost employment creation through intraregional tourism in Ghana, you have acquired a land at Ho to put up an exquisite amusement park that features a number of attractions including games, pools, gardens, rides etc. The project will cost a total of GH₵100,000. The following cash flows are expected from the project. The beta of the project is 1.5 and the market return is 15%. The risk-free rate of return is 8%. Year ₵ 0 (100,000) 1 20,000 2 25,000 3 32,000 4 35,000 Compute the IRR for the project?
As the financial manager of Wilmore Company Limited, with a passion to boost employment creation through intraregional tourism in Ghana, you have acquired a land at Ho to put up an exquisite amusement park that features a number of attractions including games, pools, gardens, rides etc. The project will cost a total of GH₵100,000. The following cash flows are expected from the project. The beta of the project is 1.5 and the market return is 15%. The risk-free rate of return is 8%.Year₵ 0(100,000) 120,000 225,000 332,000 435,000 Using the CAPM approach, what is the cost of equity on this project?Wilmore Company Limited is a levered entity with percentage of debt out of total capital being 40%. If the interest rate on a bank loan is 10%, the tax rate is 20%, and the cost of equity is as computed in (a), what will be the after tax cost of debt? What will be the weighted average cost of capital (WACC)? Using the WACC computed in (c), what will be the NPV of the investment? `…
As the financial manager of Wilmore Company Limited, with a passion to boost employment creation through intraregional tourism in Ghana, you have acquired a land at Ho to put up an exquisite amusement park that features a number of attractions including games, pools, gardens, rides etc. The project will cost a total of GHC100,000. The following cash flows are expected from the project. The beta of the project is 1.5 and the market return is 15%. The risk- free rate of return is 8%. Year (100,000) 20,000 2 25,000 32,000 35,000 3 4 i. Using the CAPM approach, what is the cost of equity on this project? ii. Wilmore Company Limited is a levered entity with percentage of debt out of total capital being 40%. If the interest rate on a bank niners: Godfred A. Bokpin, Adom Frimpong, Vera Fiador & Lordina Amoah, Page 3 of loan is 10%, the tax rate is 20%, and the cost of equity is as computed in (a), what will be the after tax cost of debt? ii. What will be the weighted average cost of capital…
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