Warning: call_user_func_array() expects parameter 1 to be a valid callback, function 'wpdocs_custom_excerpt_length' not found or invalid function name in /home/myonysqo/myonlinehomeworkhelper.com/wp-includes/class-wp-hook.php on line 287

#### Assignment: The Angel Investor

August 1, 2019 0 Comment

The concept of after-tax Weighted Average Cost of Capital (WACC) is a foundation when assessing cost of capital and investment options. The Assignment will present the opportunity to assess a financing transaction and build upon your understanding of this cost of capital concept and demonstrate your ability to calculate the after-tax WACC.

The following course outcome is assessed in this Assignment:

MT480-6: Incorporate the combined attributes of debt and equity given a cost of capital model.

Scenario: You are an Angel Investor who has been approached by an entrepreneur to assess an investment opportunity.

An entrepreneur asks for \$100,000 to purchase a diagnostic machine for a healthcare facility. The entrepreneur hopes to maintain as much equity in the company, yet the Angel Investor requires the transaction to be financed with 60% debt and 40% equity.

As the Angel Investor, you assign a cost of equity of 16% and a cost of debt at 9%. Based on Year 1 sales projections the entrepreneur assures you, the Angel Investor, a Return on Investment (ROI) of 9%; conceptually this will cover the first year’s pretax cost of debt and allow for planned equity growth and a refinancing model for Year 2.  You will use an After Tax Weighted Average Cost of Capital (AT- WACC) model which includes the after tax cost of debt and proportionate costs of Debt vs. Equity. A 35% marginal tax rate is applied.

Checklist:

• Explain the tax benefits of debt financing.
• Calculate the AT- WACC with a 60% debt and 40% equity financing structure.
• Apply the calculated AT-WACC to explain why this is or is not a viable investment for you as the Angel Investor.
• Explain a financial restructuring AT- WACC (given changes to proportions of % Debt vs. % Equity financing) that would create a positive ROI.
• Explain why you as the Angel Investor would require more or less debt vs. equity financing. Be sure to note the role of the Unified Commercial Code-1 (UCC-1) document in this transaction and the order of claim on assets in times of a bankruptcy.
• Submit your response in a minimum of a 2-page APA formatted Microsoft® Word® document to the Dropbox with additional title and references pages.

View the rubric for additional instructions: Unit 8 Assignment Rubric

• 100% Original Essays Guaranteed
• 8 Hrs Delivery Available
• Original and creative work
• Timely delivery guaranteed
• 100% confidentiality guarantee
• Variety of disciplines, topics, and deadlines
• Discounts offered on every custom-ordered paper
• Original papers written from scratch;
• 100% confidential;
• 100% plagiarism-free;
• Fast turn-around time;
• Direct communication with the writer;
• Instant email delivery;
• Free plagiarism reports;