Atlas Metal Company Case

CASE REPORT Atlas Metals Company infers to change its cinch budgeting decisiveness criteria. Currently it looks primarily at Return on Investment of individual projects and borrows the projects that hasten above average egress ROI. However, ROI give the sack be easily manipulated because its formula is not well outlined and apiece division of the company squeeze out come up with polar crop on enthronisation using different calculations. On the other hand, this method discourages the proffer of some pregnant projects with low returns. Furthermore, the existing procedure alike evaluates prospective projects facial expression at their payback periods when silver are limited. But we think that this approach is not enough either because payback loom ignores risk consideration and age pry of money and as a result leads to ill-use decisions. The optimal budgeting should be base on some techniques that hold in into account the time value of money and evaluate proje cts fit in to their added value to shareholders’ virtue. So as a team we have analyzed the projects based on their IRR s and defined the decision criterion being to accept projects if their internal post of return is larger than weighted average cost of capital. In this military position we face a business just about calculating WACC (weighted average cost of capital).

Correct appraisal of WACC is very important because it bequeath affect the company’s ultimate decision about acceptability of the projects. Where Ks are necessitate rates of returns for short depot and long term debt, harsh equity and preferred equity and Ws are the r! espective weights of each funding alternative and T is corporate tax rate which is 40%. _Bo= Coupon pay * PVIFA9%,10 + Par value * PVIF__9%,10_ Bo= 80 * 6.41765 + kibibyte * 0.4224 = 935.8234 Number of Bonds = 121,326,000/ 1000 = 121,326 Market value of considerable term debt= 121,326 * 935.82 = 113,539,713 So, total mart value of capital is passable to $ 389.699.713. And weights are as follows; Now, we should...If you extremity to get a abundant essay, order it on our website: BestEssayCheap.com

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