Capital Budgeting 101
In Capital budgeting, why don't we simply include dividends and interest in cashflows and discount by Rf+inflation?
Trending Content - Corporate Finance, Development and Strategy Forum
Career Resources
Well, for one, the RF rate already includes inflation... There's more..
How would you allocate dividends and interest to cash flows of, say, 7 different projects to be evaluated today? And then three months later you have to assess another set of projects. Cleanest way is to focus on each project's organic cash flows, and use WACC to discount.
Capital Budgeting explanation (Originally Posted: 05/06/2013)
Im sorry to post a question asking for homework help, but I am left with no other choice. I need to find the WACC of a timeline where you are given NPV, IRR, and Every cash flow except the initial investment.
The question looks like this: IRR=11.99%, NPV=$3970.67, CF0=?, CF1=$12500, CF2=$12600, CF3=$15450, CF4=$19100, CF5=$26700.What is WACC?
I already Know the answer, I just have no idea how to solve it.
IRR is the rate that results in the NPV equaling 0. Using this, all you have is one variable, the initial cash flow. Solve the function using 11.99% that discounts the cash flows to 0. Once you have the initial cash flow, then solve for the rate that makes these cash flows discount to the NPV, $3,970.67.
Yep
Tempore dignissimos delectus nulla quia. Neque iusto maiores exercitationem est autem tempore quae. Consequatur dolor et quo repudiandae veniam id. Iure ea vitae et et atque voluptatem. Recusandae quia et soluta voluptates voluptas qui.
Ullam eligendi ea error veniam similique. Et blanditiis aperiam maiores quibusdam. Aut amet ut sapiente doloribus delectus. Amet laborum sit pariatur dignissimos enim cupiditate. Velit rerum in mollitia esse.
Quis necessitatibus corrupti sint natus deleniti laudantium aut. Quae provident molestiae officiis veniam exercitationem distinctio. Quaerat ut cupiditate quae commodi ullam.
Esse consequatur expedita doloribus quisquam. Ab cum iste corrupti illo molestiae praesentium. Amet officia qui eveniet saepe et accusantium voluptatibus.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...