{"id":44637,"date":"2024-04-26T23:12:54","date_gmt":"2024-04-26T23:12:54","guid":{"rendered":"http:\/\/localhost\/branding\/cost-of-capital\/"},"modified":"2024-04-26T23:12:54","modified_gmt":"2024-04-26T23:12:54","slug":"cost-of-capital","status":"publish","type":"post","link":"https:\/\/sheilathewriter.com\/blog\/cost-of-capital\/","title":{"rendered":"Cost of Capital"},"content":{"rendered":"<p>Cost of Capital<\/p>\n<p>Student\u2019s name<\/p>\n<p>Affiliation<\/p>\n<p>Course<\/p>\n<p>Date<\/p>\n<p>investment outlay of $30 million, consisting of $25 million for equipment and $5 million for net working capital (NWC) (plastic substrate and ink inventory); NWC recoverable in terminal year<\/p>\n<p>Project and equipment life: 5 years<\/p>\n<p>Sales: $25 million per year for five years<\/p>\n<p>Assume gross margin of 60% (exclusive of depreciation)<\/p>\n<p>Depreciation: Straight-line for tax purposes<\/p>\n<p>Selling, general, and administrative expenses: 10% of sales<\/p>\n<p>Tax rate: 35%<\/p>\n<p>Initial investment-30 million<\/p>\n<p>Equipment =25 million<\/p>\n<p>Net working Capital =5million<\/p>\n<p>Sales =25 million<\/p>\n<p>Gross margin 60%<\/p>\n<p>S&amp;G&amp;A=10% Sales=(10\/100*25 million)=2.5 million<\/p>\n<p>Initial Outlay<\/p>\n<p>Equipment + Net Working Capital<\/p>\n<p>=25 million + 5 million<\/p>\n<p>CFt = (revenues &#8211; costs) *(1 &#8211; tax rate)<\/p>\n<p>Revenues= 25 million<\/p>\n<p>Costs=2.5 million<\/p>\n<p>Tax rate =35%<\/p>\n<p>Operating Cashflow<\/p>\n<p>1st YEAR= (25 million-2.5 million) *(1-0.35)<\/p>\n<p>=22.5 million * (0.65)<\/p>\n<p>=14.625 million<\/p>\n<p> 2nd YEAR= (25 million-2.5 million) *(1-0.35)<\/p>\n<p>=22.5 million * (0.65)<\/p>\n<p>=14.625 million<\/p>\n<p>3rd YEAR= (25 million-2.5 million) *(1-0.35)<\/p>\n<p>=22.5 million * (0.65)<\/p>\n<p>=14.625 million<\/p>\n<p>4th YEAR= (25 million-2.5 million) *(1-0.35)<\/p>\n<p>=22.5 million * (0.65)<\/p>\n<p>=14.625 million<\/p>\n<p>5th YEAR= (25 million-2.5 million) *(1-0.35)<\/p>\n<p>=22.5 million * (0.65)<\/p>\n<p>=14.625 million<\/p>\n<p>Where: A = P (1 + rt) =<\/p>\n<p>r = (1\/5) ((39625000\/25000000) &#8211; 1) = 0.117r = 0.117<\/p>\n<p>r=11.7%<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Cost of Capital Student\u2019s name Affiliation Course Date investment outlay of $30 million, consisting of $25 million for equipment and<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-44637","post","type-post","status-publish","format-standard","hentry"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.5 - 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