business finance 1

BCO212 Business Finance I Professor Charlotte Fleury
Individual task
Introduction to Financial Management, the Time Value of Money and the meaning and measurements of risk and return
Formalities: Font: Arial 12 pts. Excel (not PDF)
The in-text References and the Bibliography have to be in Harvard’s citation style.
Submission: Week (3) – Via turnitin by Sunday 12th June 23:59 CET
Weight: This task is a 30% of your total grade for this subject.
Exercises (5 exercises / 100 points)
1. Calculate the weighted average cost of capital (WACC), considering that Company W has a total value of debt and equity of EUR 1,246,890, and hold 40% in debt.
The cost of equity is of 6% and the company borrows at a cost of 3%. Company D pays 35% tax.
An investor bought shares of Company W and as a return on investment of 3%, did he made a cost-effective decision?
2. An investor has 15,000 and can expect to earn 3% interest on that sum each year for the next 5 years with interest compounded annually, what is the future value?
3. Imagine you are considering investing EUR 10,000 for 1 year with a annual interest rate of 3%.
As an investor, which option would you rather chose: receive 10,000 now or 11,200 one year from now
4. A USD 50,000 project with a 4% return over 5 years is expected to generate the following CF:
Year 1 9,000
Year 2 12,000
Year 3 11,000
Year 4 13,000
Year 5 15,000
Calculate the present value of the sum of future cash flows and the net present value of the project considering the discount is 8%. Would you recommend the investment ? Why/ why not
5. EUR 15,000 is to be coumpounded semi-annually at a rate of 2% for 50 years. Calculate the investment’s value at the end of the time horizon
PV = FV / ((1+ (i/n)) ^ n*t
WACC = equity / (equity +debt) x cost of equity + debt (equity +debt) x cost of debt x (1-tax rate)
FV= PV * (1+(i/n))^t*n

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