College of Accounting Education
3F, Business & Engineering Building
Matina, Davao City
Phone No.: (082)305-0645 Local 137
Final Requirements
Instructions:
You are a financial analyst for a mid-sized corporation. The company is evaluating a new project
and has provided you with the following financial data. Your task is to analyze the project and
prepare a comprehensive evaluation report covering capital budgeting, cost of capital, and capital
structure. Your report should include calculations, interpretations, and recommendations based
on the given data.
Given Information:
1. The following is the annual result of the operation for 5 years :
Cash Sales P800,000.00
Cost of Sales 350,000.00
Operating Expense (Cash) 380,000.00
Depreciation 50,000.00
Tax Rate 30%
2. Initial Investment: P250,000
3. Debt-to-Equity Ratio: 60:40
4. Interest Rate on Debt: 6%
5. Market Premium Rate 7%
6. Risk Free Rate 5%
7. Beta 1.3
Requirements:
Prepare a Comprehensive Project Evaluation Report that addresses the following:
1. Cost of Capital Analysis
• Compute the Weighted Average Cost of Capital (WACC) using the given Debt-to-Equity
ratio.
2. Capital Budgeting Analysis
• Calculate the Net Cash Inflow
• Determine the Payback Period and evaluate its feasibility.
• Calculate the Net Present Value (NPV) of the project. (Use 3-digit factor)
• Compute the Internal Rate of Return (IRR) and compare it with WACC. Discuss the result.
3. Recommendation
• Based on your analysis, provide a clear recommendation on whether the company should
proceed with the project or not. Explain your recommendation.
1
Assessment Criteria:
Your evaluation will be assessed based on the following criteria:
Excellent (5) Proficient (4) Satisfactory Developing (2) Needs
Criteria (3) Improvemen
t (1)
Correctly Mostly correct Some errors in Major errors in Incorrect or
calculates calculations calculations; calculations; missing
NPV, IRR, and with minor interpretations weak or calculations
Payback errors; are present but unclear with no
Period with interpretations lack thorough explanations meaningful
detailed are clear but justification. and analysis or
Capital Budgeting explanations may lack justifications. justification. 4 x _______
Analysis and correct depth.
interpretations
. All
assumptions
are well-
justified.
Accurately Minor errors in Some errors in Major errors in Incorrect or
computes WACC WACC WACC missing
WACC and calculation; computation; computation; WACC
provides a discussion is implications discussion is computation
Cost of Capital thorough mostly clear discussed but vague or lacks with no 4 x _______
Analysis discussion of and relevant. lack depth. relevance. discussion of
its implications implications.
on investment
decisions.
Provides an in- Good analysis Basic Weak No
depth analysis of risk and discussion of discussion of meaningful
of financial risk return; capital risk and return; risk and return; discussion of
and return, structure some points on capital risk, return,
with a well- discussion is capital structure or capital
supported present but structure but analysis is structure.
Capital Structure
discussion of lacks depth. not well- minimal. 4 x _______
Analysis
capital developed.
structure
advantages
and
disadvantages.
Provides a Recommendat Recommendati Weak No
well-supported ion is on is present recommendati recommenda
recommendati reasonable but lacks on with little tion or an
Recommendation on with both and mostly strong supporting unsupported 4 x _______
quantitative justified with justification. data. recommenda
and qualitative supporting tion.
justifications. data.
Report is well- Report is clear Report is Report is Report is
organized, with minor somewhat poorly unclear,
professionally organizational clear but organized and disorganized,
Overall Clarity presented, and or contains difficult to and full of
free from grammatical several follow. errors. 4 x _______
and Presentation
errors. issues. grammatical or
formatting
errors.
Total