Assignment: Given Company: Coach Inc. Calculate WACC (weighted average cost of capital) for the company, referring to most recent financial statements from finance.yahoo.com. Now use this WACC as the discount rate to conduct capital budgeting analysis for a project that the firm is considering and then decide whether it should be accepted or not which is ? Building a new Building? for $1 million. If you do not have a number you need, research it and state your assumptions that you used to get the missing number. Attach the excel spreadsheet used for calculations. HINTS from Professor: 1. Corporations generally template their capital expenditure analyses and require managers to cut off the analysis after a set number of years. Please cut off this analysis at 10 years. 2. At the end of a project, the manager should show one-time cash inflow for the fair market value of the project assets. Basically, it is assumed that the project assets will be sold or disposed of at the end of the project. In this case, we are building a new building. I recommend that you assume that the FMV (Fair Market Value) of the building will increase each year by 3 to 4% and will be sold at the end of the last year of the project. This building is the only asset in this project. 3. A capital budgeting analysis should show annual positive future cash flows that you will discount (Using the WACC weighted average cost of capital that your team will calculate per the assignment). The NPV net present value would then be calculated as the PV present value of the future cash flows, minus the initial investment today, equals the NPV. If the NPV is positive, the project is a go. If the NPV is negative, the project is usually a no-go. a. I recommend that your team decide what the purpose of the building is for your corporation. For example, is it a small retail outlet, is it a new service building at an existing facility, is it a building in another location constructed to consolidate services being performed at two or more other locations, or is whatever your team decides. Briefly explain the purpose of the building. b. Assume $X per year future after-tax cash flows. I do NOT need to see an analysis of cash inflows minus cash outflows or revenues minus expenses. Simply explain why such occurs. For example, will the building generate new incremental cash inflows, or reduce existing cash outflows by an incremental amount or whatever you decide that is believable, based on the purpose of the building. c. Your future cash flows can be the same amount each year or not, but you need to briefly explain your assumptions.
Paper#8431 | Written in 18-Jul-2015Price : $25