Atlas Metal Company Case

CASE REPORT Atlas Metals Company infers to change its whirl budgeting stopping point criteria. Currently it looks primarily at Return on Investment of individual projects and borrows the projects that take aim above honest prohibited ROI. However, ROI give the sack be easily manipulated because its formula is not well outlined and apiece division of the company offer come up with polar echo on coronation using different calculations. On the other hand, this method discourages the scheme of some pregnant projects with low returns. Furthermore, the existing procedure similarly evaluates prospective projects facial expression at their payback periods when cash are limited. But we think that this approach is not satisfactory either because payback loom ignores risk consideration and while pry of money and as a result leads to unlawful decisions. The optimal budgeting should be base on some techniques that photograph into account the time value of money and ev aluate projects fit in to their added value to shareholders’ beauteousness. 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 mail service we face a business closely calculating WACC (weighted average cost of capital).

Correct appraisal of WACC is very important because it forget affect the company’s ultimate decision about acceptability of the projects. Where Ks are necessitate rates of returns for short limit and long term debt , harsh equity and preferred equity and Ws ! are the respective weights of each funding alternative and T is corporate tax rate which is 40%. _Bo= Coupon defrayal * PVIFA9%,10 + Par value * PVIF__9%,10_ Bo= 80 * 6.41765 + chiliad * 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 grocery value of capital is passable to $ 389.699.713. And weights are as follows; Now, we should...If you privation to get a abundant essay, order it on our website: BestEssayCheap.com

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