Posted: August 18th, 2015

Cost of Capital and Project Risk.

1.Calculate the current weighted average cost of capital for CWC.
2.Calculate the appropriate discount rate for the healthy bottled water project.
3.Perform a sensitivity analysis for sales price, variable costs, fixed costs, and unit sales at +/- 10%, 20%, and 30% from the base case.
4.Perform an analysis of the following two scenarios:
Best case: Selling 2,500,000 units at a price of $1.24 each, with variable production costs of $0.22 per unit.
Worst case: Selling 950,000 units at a price of $1.32 per unit, with variable production costs of $0.27 per unit.
Explain if the firm should undertake the healthy bottled water project.

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