• 2 years ago, the company had issued 3,000 5-year bonds outstanding with an 8.0% coupon rate and semi-annual coupons. The face value of these bonds is $1,000 and they currently trade at $1,029.70. They have just paid the last coupon.
• 68,530 company shares are also outstanding, and currently trade at $40 each. Currently the risk-free rate and market risk premium are estimated to be 4.0% and 6.0%, respectively. The beta of a comparable firm is 0.75.
• Pedigree Pooch Food Ltd also borrowed $820,000 recently at 2.50% p.a., compounded weekly.
The corporate tax rate is 30%.
Two questions to be answered:
(While these questions are solved in Excel, they must also be presented properly in a Word/Pdf document)
2. Using the WACC you have established, (round it to the nearest whole number), undertake an NPV analysis of the two alternatives Lucy has regarding the manufacturing machines for the dog treats.