21 Jun For Caspiano ONLY** #3
#3 Mini Case: Ford Company Capital Budgeting Project:
You are provided with the following information to determine Ford’s weighted average cost of capital that will be used for capital project calculations. As a Finance Analyst for Ford, you will calculate and support the development of its weighted average cost of capital and communicate it to the CFO of Ford. After you have calculated the required data points in the two tables below, provide a brief paper (approximately 300 to 400 words) to the CFO summarizing the weighted average cost of capital you determined for Ford, where they may be risks in the calculation (how the calculation may change over time), how the weighted average cost of capital you calculated should be applied when making cost of capital project decisions, and some scenarios that the CFO should be aware of that may change the weighted average cost of capital at some future point. Your discussion of the scenarios should cover aspects of management, marketing and broader economic factors that may influence the weighted average cost of capital.
Financial Management
Ford Company
Capital Budgeting Problem
The market value of Fords’ equity, preferred stock and debt are $7 billion, $3 billion, and $10 billion, respectively. Ford has a beta of 1.8, the market risk premium is 7%, and the risk-free rate of interest is 4%. Ford’s preferred stock pays a dividend of $3.5 each year and trades at a price of $27 per share. Ford’s debt trades with a yield to maturity of 9.5%. What is Ford’s weighted average cost of capital if its tax rate is 30%?
| Ford Company | ||||
| Market Capitalization | Weight | |||
| Equity (E) | ||||
| Preferred (P) | ||||
| Debt (D) | ||||
| Total | ||||
| Ford Company | ||||||
| Weight | Cost | After-tax
Marginal Weight |
||||
| Equity (E) | X | = | ||||
| Preferred (P) | X | = | ||||
| Debt (D) | X | = | ||||
| Total | X | = | ||||
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.