Posted: July 6th, 2016

How to figure out the expected cash flow?

Financial math problems with the use of different financial functions such as Rate of Return, WACC, Cost of Equity and a few others.

People with a background in accounting or finance are familiar with these terms and functions.

Please see attached file and answer the questions.

I am having trouble figuring out the correct WACC and expected cash flow for this case study.

The firm’s target debt to capital ratio is 18%. I need to estimate the firm’s WACC using 9.25% for effective cost of debt. Then model the expected cash flows for the new product investment opportunity and value this opportunity at the WACC.

NOTE: I have attached a pdf that gives financial information on the firm’s competitors since it is a private company and has no beta. I am also attaching my forecasted financial statements given the two scenarios: not investing and investing.

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