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What is the weighted cost of capital

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Reference no: EM132810810

Question -

a. What are some of the complexities related to capital projects in an international context as oppose to capital projects of a domestic nature.

b. A company is considering making a capital investment in developing a cattle farm in East Coast, Guyana. They intend to invest US$1,000,000 of which 60% would be equity at 15% cost of capital and 40% debt with the cost of debt being 8%. They expect that they would earn net income of US$250,000 per annum for the next 5 years. Annual depreciation is estimated at US$40,000 per annum.

i) What is the weighted cost of capital?

ii) What is the annual net cash inflow?

iii) Based on NPV and IRR analysis should the project be undertaken?

iv) What other factor should the company consider before making this making this investment?

Reference no: EM132810810

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