The assignment entails Weighted Average Cost of Capital. Moreover, there is a description of Investment and Corporate Valuation. So, explain what the time value of money is and why it is so important in the field of finance.

Weighted Average Cost of Capital – Investment and Corporate Valuation

1) Explain what the time value of money is and why it is so important in the field of finance. (7 marks)

2) What is the Weighted Average Cost of Capital (“WACC”). Explain its uses. Calculate the WACC if the project raises the funds using both debt and equity. (NB Show all formulas & workings) (8 marks)

3) Make a recommendation to Renewables plc on the investment plan for the wind turbines project using a net present value approach. NB Show all formulas & workings) (15 marks)

Weighted Average Cost of Capital – Investment and Corporate Valuation

4) What is the payback period for this project and what are the advantages & disadvantages of the payback period as an investment appraisal technique? Critically compare & contrast  the use of net present value as an investment appraisal and valuation tool and other tools or methods that can be used to assist in making both investment and corporate valuation decisions from a financial perspective. 

ANSWER ANY TWO ONLY OUT OF THE FOLLOWING QUESTIONS:

(1)    Portfolio theory suggests diversification can lower risk. Critically evaluate how effectively we can deal with risk and the various means we can use to limit or assess risk.

 Weighted Average Cost of Capital – Investment and Corporate Valuation

(2)    Evaluate the key advantages & disadvantages of raising capital via equity and debt, giving practical examples of situations when these might be appropriate

 

(3)    Discuss the importance of Working Capital to a business and consider how you determine its health or otherwise.

Detailed Instructions

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