IRR > WACC the capital Invested in the investment project will create a return higher than the value of the invested capital. Such a project is attractive for investment
IRR = WACC the Project will not bring any losses or income in the future period and such a project is not attractive
IRR < WACC Such a project will generate negative discounted cash flow in the future
IRR=14
Find WACC:
including shares and bond loans:
EP=10
E=2.7
P=27
WACC=KE×y+KD×b×(1−T)
K=20 000 000 + 50 000 000= 70 000 000
E=2 000 000
y=10%
D= 50 000 000+1 000 000=51 000 000
WACC=700000002000000×10+700000001000000×8×(1−0.5)+7000000050000000×10×(1−0.5)=3.91
EP=9
WACC=700000002000000×9+700000001000000×8×(1−0.5)+7000000050000000×10×(1−0.5)=3.89
IRR > WACC
IRR > 3.91
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