A company has a net EBIT of EUR1bn and has a capital employed (CE) of 10bn EUR. The weighted average cost of capital (WACC) is 12%. Define whether this creates or destroys value. Determine the amount of value created or destroyed. How would you explain to the managers of this company that generates EUR1bn of net EBIT that they are destroying value. What are the driver for this company to create value?.

WACC is an important concept because it represents a company's cost of capital; any project that it undertakes should have a return that exceeds its WACC. T/F?

1. DPCL is a small-sized firm manufacturing hand tools. Its manufacturing plant is situated in Sohar. The company’s sales in the year ending December 2014 were OMR 1000 million on an asset base of OMR 650 million. The net profit of the company is OMR76 million. The management of the company wants to improve profitability further. The required rate of return of the company is 10%. The company is currently considering two investment proposals. One is to expand its production capacity. The estimated cost of the new equipment is OMR 250 million and has a life of 10 years. Forecasts of cash inflows would be OMR45 million per annum for the first 3 years, OMR 68 million from 4 to 8 years and OMR 30 million for the last 2 years. The plant can be sold for 55 million at the end of its economic life.   The second proposal is to replace one of the old machines in Sohar to reduce the cost of operations. The new machine will cost OMR 50 million. The life of the machine is 10 years without any…

Which of the following would be most likely be included as part of free cash flows? The lost revenue that could have been used if a warehouse was leased out The cost of an already completed marketing study The interest that will be paid to debt holders to finance the project The salary paid to the firm's CEO To UN 스용 515

Your company requires that all planned investment projects should have a positive net present value at the company cost of capital of 15%. Explain how this policy can lead to wrong investment decisions for the company.

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I NEED THE SOLUTION FOR PART C AND PART D

The market values and​ after-tax costs of various sources of capital used by Ridge Tool are shown in the following​ table attached:     a. Calculate the​ firm's weighted average cost of capital. b.Explain how the firm can use this cost in the investment​ decision-making process.

Your company wants to decide between Investment A, which will cost $100K upfront, and Investment B, which will cost $150K upfront. If the economy performs well, Investment A will bring in $750K for your company, but if the economy performs poorly, then it will lose $250K for your company. If the economy performs well, Investment B will bring in $850K for your company, but if the economy performs poorly, then it will lose $300K for your company. There’s a 60% chance of a strong market and a 40% chance of a weak market.   Assuming your company is risk-neutral, which option should you choose?

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