As a recent graduate of the UWIOC, The General Manager of the company has hired you to work alongside the Financial Controller of the company to help determine whether the company should invest in the new product line. He has provided you with the following questions to guide you in your assessment of the project and to present your findings to the Company. 1. Determine the weighted average cost of capital (WACC) for Vigour Pharmaceuticals. (Formula to be used is attached)
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Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
As a recent graduate of the UWIOC, The General Manager of the company has hired you to work alongside the Financial Controller of the company to help determine whether the company should invest in the new product line. He has provided you with the following questions to guide you in your assessment of the project and to present your findings to the Company.
1. Determine the weighted average cost of capital (WACC) for Vigour Pharmaceuticals. (Formula to be used is attached)
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- Vigour Pharmaceuticals Ltd. is considering investing in a newproduction line for its pain-reliever medicine for individuals whosuffer from cardio vascular diseases. The company has to invest inequipment which costs $2,500,000 and will be depreciated under theMACRS system for a 5-year asset class. It is expected to have a scrapvalue of $700,000 at the end of the project. Other than the equipment,the company needs to increase its cash and cash equivalents by$100,000, increase the level of inventory by $30,000, increaseaccounts receivable by $250,000 and increase account payable by$50,000 at the beginning of the project. Vigour Pharmaceuticals expectthe project to have a life of five years. The company would have topay for transportation and installation of the equipment which has aninvoice price of $450,000.The company has already invested $75,000 in Research and Developmentand therefore expects a positive impact on the demand for the newpain-reliever. Expected annual sales for the…Vigour Pharmaceuticals Ltd. is considering investing in a newproduction line for its pain-reliever medicine for individuals whosuffer from cardio vascular diseases. The company has to invest inequipment which costs $2,500,000 and will be depreciated under theMACRS system for a 5-year asset class. It is expected to have a scrapvalue of $700,000 at the end of the project. Other than the equipment,the company needs to increase its cash and cash equivalents by$100,000, increase the level of inventory by $30,000, increaseaccounts receivable by $250,000 and increase account payable by$50,000 at the beginning of the project. Vigour Pharmaceuticals expectthe project to have a life of five years. The company would have topay for transportation and installation of the equipment which has aninvoice price of $450,000.The company has already invested $75,000 in Research and Developmentand therefore expects a positive impact on the demand for the newpain-reliever. Expected annual sales for the…Vigour Pharmaceuticals Ltd. is considering investing in a newproduction line for its pain-reliever medicine for individuals whosuffer from cardio vascular diseases. The company has to invest inequipment which costs $2,500,000 and will be depreciated under theMACRS system for a 5-year asset class. It is expected to have a scrapvalue of $700,000 at the end of the project. Other than the equipment,the company needs to increase its cash and cash equivalents by$100,000, increase the level of inventory by $30,000, increaseaccounts receivable by $250,000 and increase account payable by$50,000 at the beginning of the project. Vigour Pharmaceuticals expectthe project to have a life of five years. The company would have topay for transportation and installation of the equipment which has aninvoice price of $450,000.The company has already invested $75,000 in Research and Developmentand therefore expects a positive impact on the demand for the newpain-reliever. Expected annual sales for the…
- Vigour Pharmaceuticals Ltd. is considering investing in a newproduction line for its pain-reliever medicine for individuals whosuffer from cardio vascular diseases. The company has to invest inequipment which costs $2,500,000 and will be depreciated under theMACRS system for a 5-year asset class. It is expected to have a scrapvalue of $700,000 at the end of the project. Other than the equipment,the company needs to increase its cash and cash equivalents by$100,000, increase the level of inventory by $30,000, increaseaccounts receivable by $250,000 and increase account payable by$50,000 at the beginning of the project. Vigour Pharmaceuticals expectthe project to have a life of five years. The company would have topay for transportation and installation of the equipment which has aninvoice price of $450,000.The company has already invested $75,000 in Research and Developmentand therefore expects a positive impact on the demand for the newpain-reliever. Expected annual sales for the…Vigour Pharmaceuticals Ltd. is considering investing in a new production line for its pain-reliever medicine for individuals who suffer from cardio vascular diseases. The company has to invest in equipment which costs $2,500,000 and will be depreciated under the MACRS system for a 5-year asset class. It is expected to have a scrapvalue of $700,000 at the end of the project. Other than the equipment, the company needs to increase its cash and cash equivalents by $100,000, increase the level of inventory by $30,000, increase accounts receivable by $250,000 and increase account payable by $50,000 at the beginning of the project. Vigour Pharmaceuticals expect the project to have a life of five years. The company would have to pay for transportation and installation of the equipment which has an invoice price of $450,000. The company has already invested $75,000 in Research and Development and therefore expects a positive impact on the demand for the new pain-reliever. Expected annual…Vigour Pharmaceuticals Ltd. is considering investing in a newproduction line for its pain-reliever medicine for individuals whosuffer from cardio vascular diseases. The company has to invest inequipment which costs $2,500,000 and will be depreciated under theMACRS system for a 5-year asset class. It is expected to have a scrapvalue of $700,000 at the end of the project. Other than the equipment,the company needs to increase its cash and cash equivalents by$100,000, increase the level of inventory by $30,000, increaseaccounts receivable by $250,000 and increase account payable by$50,000 at the beginning of the project. Vigour Pharmaceuticals expectthe project to have a life of five years. The company would have topay for transportation and installation of the equipment which has aninvoice price of $450,000.The company has already invested $75,000 in Research and Developmentand therefore expects a positive impact on the demand for the newpain-reliever. Expected annual sales for the…
- Vigour Pharmaceuticals Ltd. is considering investing in a new production line for its pain-reliever medicine for individuals who suffer from cardio vascular diseases. The company has to invest in equipment which costs $2,500,000 and will be depreciated under the MACRS system for a 5-year asset class. It is expected to have a scrapvalue of $700,000 at the end of the project. Other than the equipment, the company needs to increase its cash and cash equivalents by $100,000, increase the level of inventory by $30,000, increase accounts receivable by $250,000 and increase account payable by $50,000 at the beginning of the project. Vigour Pharmaceuticals expect the project to have a life of five years. The company would have to pay for transportation and installation of the equipment which has an invoice price of $450,000. The company has already invested $75,000 in Research and Development and therefore expects a positive impact on the demand for the new pain-reliever. Expected annual sales…Vigour Pharmaceuticals Ltd. is considering investing in a new production line for its pain-reliever medicine for individuals who suffer from cardio vascular diseases. The company has to invest in equipment which costs $2,500,000 and will be depreciated under the MACRS system for a 5-year asset class. It is expected to have a scrapvalue of $700,000 at the end of the project. Other than the equipment, the company needs to increase its cash and cash equivalents by $100,000, increase the level of inventory by $30,000, increase accounts receivable by $250,000 and increase account payable by $50,000 at the beginning of the project. Vigour Pharmaceuticals expect the project to have a life of five years. The company would have to pay for transportation and installation of the equipment which has an invoice price of $450,000. The company has already invested $75,000 in Research and Development and therefore expects a positive impact on the demand for the new pain-reliever. Expected annual sales…Vigour Pharmaceuticals Ltd. is considering investing in a new production line for its pain-reliever medicine for individuals who suffer from cardio vascular diseases. The company has to invest in equipment which costs $2,500,000 and will be depreciated under the MACRS system for a 5-year asset class. It is expected to have a scrapvalue of $700,000 at the end of the project. Other than the equipment, the company needs to increase its cash and cash equivalents by $100,000, increase the level of inventory by $30,000, increase accounts receivable by $250,000 and increase account payable by $50,000 at the beginning of the project. Vigour Pharmaceuticals expect the project to have a life of five years. The company would have to pay for transportation and installation of the equipment which has an invoice price of $450,000. The company has already invested $75,000 in Research and Development and therefore expects a positive impact on the demand for the new pain-reliever. Expected annual…
- Vigour Pharmaceuticals Ltd. is considering investing in a new production line for its pain-reliever medicine for individuals who suffer from cardio vascular diseases. The company has to invest in equipment which costs $2,500,000 and will be depreciated under the MACRS system for a 5-year asset class. It is expected to have a scrapvalue of $700,000 at the end of the project. Other than the equipment, the company needs to increase its cash and cash equivalents by $100,000, increase the level of inventory by $30,000, increase accounts receivable by $250,000 and increase account payable by $50,000 at the beginning of the project. Vigour Pharmaceuticals expect the project to have a life of five years. The company would have to pay for transportation and installation of the equipment which has an invoice price of $450,000. The company has already invested $75,000 in Research and Development and therefore expects a positive impact on the demand for the new pain-reliever. Expected annual sales…Vigour Pharmaceuticals Ltd. is considering investing in a new production line for its pain-reliever medicine for individuals who suffer from cardio vascular diseases. The company has to invest in equipment which costs $2,500,000 and will be depreciated under the MACRS system for a 5-year asset class. It is expected to have a scrapvalue of $700,000 at the end of the project. Other than the equipment, the company needs to increase its cash and cash equivalents by $100,000, increase the level of inventory by $30,000, increase accounts receivable by $250,000 and increase account payable by $50,000 at the beginning of the project. Vigour Pharmaceuticals expect the project to have a life of five years. The company would have to pay for transportation and installation of the equipment which has an invoice price of $450,000. The company has already invested $75,000 in Research and Development and therefore expects a positive impact on the demand for the new pain-reliever. Expected annual…Vigour Pharmaceuticals Ltd. is considering investing in a new production line for its pain-reliever medicine for individuals who suffer from cardio vascular diseases. The company has to invest in equipment which costs $2,500,000 and will be depreciated under the MACRS system for a 5-year asset class. It is expected to have a scrapvalue of $700,000 at the end of the project. Other than the equipment, the company needs to increase its cash and cash equivalents by $100,000, increase the level of inventory by $30,000, increase accounts receivable by $250,000 and increase account payable by $50,000 at the beginning of the project. Vigour Pharmaceuticals expect the project to have a life of five years. The company would have to pay for transportation and installation of the equipment which has an invoice price of $450,000. The company has already invested $75,000 in Research and Development and therefore expects a positive impact on the demand for the new pain-reliever. Expected annual sales…