Reference no: EM13493442

The purpose of the discussion question is to allow you as the student/learner to demonstrate your understanding of the chapter's key learning points and how you might apply them in given situation.

Participating in the discussion question forum provides you as the student/learner an opportunity to compare your ideas to ideas from others in your class.

Instruction: Using the chapter's key learning points, provide your answer to the questions below. The workbook presented a story about Mary Benn, CFA. She was asked to produce a risk analysis of 4G, Inc. and Qphone. Given her findings, which company appears to be the riskier investment?

Support your stance using evidence from the story and information from the chapter.

Your second assignment requires you to utilize WACC as to choose the best investment given the following criteria:

Requirement 1. The project only lasts five years.
Requirement 2. You must finance the project by an equal split between debt and equity funding.
Requirement 3. The project will require $35,000 worth of stock and $35,000 worth of debt.

Further, the market imposes the following constraints:

- The tax rate is 35%. - β = 1.25 - The risk free rate r_f is 5%.

You have two investment opportunities:

Investment 1. A slowly growing project.
Investment 2. A slowly declining project.

The cash flows and rates are as follows:

Annual Cash Flows

Investment 1 Investment 2

Outlay -25,000 -30,000

1 $100,000.00 $115,000.00

2 $105,000.00 $109,523.81

3 $110,250.00 $104,308.39

4 $115,762.50 $99,341.32

5 $121,550.63 $94,610.78

Note: The table lists the market premium (r_m- r_f) for the equity rates.

Calculate the WACC for both investment. Calculate the NPV for investments discounted at their respective WACCs. Take a stance on which investment provides the best or worst opportunity.

You may want to use Excel's NPV() function to figure NPV.

The Task

Your assignment is to create a 5-page argumentative/persuasive research paper given one of the following options:

Option 1. Argue for or against the best or worst investment choices.
Option 2. Argue for or against the acceptance of a rejected investment.
Option 3. Argue for or against the acceptance of both investments.

The paper should cite approximately three peer reviewed full text journal articles retrieved from ProQuest, BE & T, InfoTrac, and Academic OneFile. Your paper should integrate at least the following elements:

- The presentation of a firm position regarding your stance or theory.
- An offering of a strong position using evidence-based argumentation.
- An address of opposing points as to present a well-rounded argument controlling personal biases and strengthening your argument while diminishing the opposition's points.
- An effort to use evidence and argument flow as to instill a sense of trust into your reader.

Do you feel stuck while planning your argument? If so, then try jumpstarting the assignment by using the following steps:

1. Choose a stance you believe in and write down why you believe in the stance.
- Ask yourself the following questions:
- Who is my audience and which points will they be interested in?
- What kind of tone am I assuming for my argument?
- Does my tone match the audience? (If not, consider changing your tone.)
- Am I engaging in a fallacy or illogical stance? (Make sure you make sense or no one will believe you!)
- Would someone agree or disagree with me given my points? (Argue with yourself as to find the strengths and weaknesses of your stance.)
- Am I making a moral or cultural argument? (If so, you may need to reconsider a stance able to utilize scholarly literature.)
- Can I research my stance? (If not, you may need to consider a new stance.)

2. Research as to find the evidence needed to support your stance or theory. Seek the needed facts, quotes, and existing research you can use for your argument

3. Outline and write the essay starting with the evidence-supported defense of your points and slowly transition into an address of opposing points.

4. Provide a brief summary of the argument as to conclude the essay.