(B) Calculate IRR (C) Calculate WACC

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(B) Calculate IRR
(C) Calculate WACC

B Calculate Irr C Calculate Wacc 1 (54.14 KiB) Viewed 63 times

INVESTOR CASH FLOW Year 1 Year 2 Cash out - 70 (57.00) Cash in, Dividends 13.00 15.00 Cash in, Sale of company Investors, net cash (57.00) (42.00) Step 7 Calculate the Internal Rate of Return for the investors Year 3 Year 4 Year 5 (42.00) (36.00) (22.00) 6.00 14.00 30.00 0 240.00 0 (36.00) (22.00) 248.00 Remember here that the IRR is the Discount Rate that makes the PV = FV. The PV is the initial investment by the Investors. The FV is equal to all distributions the Investors receive during the 5-year period. Their distributions are their share of the dividends and their share of the sale of the company. Remember this formula for PV: PV = PMT/(1 + i) + PMT2/(1+i) + PMT3/(1 + i)* + ... (PMTN + FV)/(1 + i)" The IRR, therefore, is the in this formula. + C. Weighted Average Cost of Capital The Riyadh company above has 92 different lines of credit from six Saudi banks. Currently loans total over SAR 800 million. What is the weighted average cost of these loans? Summary Loan Amount Profit % Weights WACC Long term loans 17,820,759 4.37% Short term loans 558,299,181 2.77% Letters of credit 138,878,221 3.50% loans Project loans 112,579,977 2.99% Total Loans 827,578,138