Agenda Case Solution
Answer No. 1:
- The calculation determines that the most suitable capital structure for Slam Corporation is the 30% of debt ratio where the investor requires 14% of rate of return. The above capital structure is recommended due to the reasonable figure of weighted average cost of capital. The WACC is essential for the investment decision of Slam Corporation as the higher WACC will reduce the future cash flows in present value terms.
Answer no. 3:
- The negative net present value generated by the new purchase of grinder indicates that it will leads to loss of value to the shareholders therefore, it is recommended that the project should not be proceeded by the company.
Answer no. 4:
- The net present value generated by the project is positive $39 million, which indicates that this will enhance the value of the shareholders. In addition to this, the internal rate of return indicates the figure of around 130% which is substantially higher. Therefore it is recommended that the company should proceed with the project.
Answer no. 5:
The net present value calculation indicates that the purchase of new machine is beneficial for the company as it generates RM 1000 for shareholders. Not only the financial perceptive, but also the non-financial perspective of the new machinery is quite well for the company due to the operational efficiency and environmental friendly nature.............................