WACC, EVA & MVA Assignment
Question # 00548651
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Updated on: 06/19/2017 01:53 AM Due on: 06/19/2017
WACC Assignment Instructions - WACC, EVA & MVA Assignment
Part I: Calculate Team Chester’s company's Weighted Average Cost of Capital in Practice Year 2. In
calculating cost of equity, use the CAPM. In the CAPM, use 6.0% for the risk free rate, 5.0% for the
market risk premium, and assume your company is rated average in terms of financial risk, in the prime
of its life cycle. Select an appropriate beta (hint: what beta reflects average risk).
Part II: Calculate team Chester company's Economic Value-Added (EVA) for Practice Year 2.
Part III: Calculate team Chester company's Market Value-Added (MVA) for Practice Year 2.
Part IV: Suppose that the beta value you used in the previous parts is really an unlevered beta. Calculate
the beta value that is consistent with your actual leverage. The debt beta should be assumed to be zero.
Some WACC Assignment Information!
Here's some information regarding the WACC Assignment: EVA = NOPAT - Dollar Cost of Capital NOPAT =
(EBIT(1-T)) MVA = Market value of equity - Book value of equity
Part I: Calculate Team Chester’s company's Weighted Average Cost of Capital in Practice Year 2. In
calculating cost of equity, use the CAPM. In the CAPM, use 6.0% for the risk free rate, 5.0% for the
market risk premium, and assume your company is rated average in terms of financial risk, in the prime
of its life cycle. Select an appropriate beta (hint: what beta reflects average risk).
Part II: Calculate team Chester company's Economic Value-Added (EVA) for Practice Year 2.
Part III: Calculate team Chester company's Market Value-Added (MVA) for Practice Year 2.
Part IV: Suppose that the beta value you used in the previous parts is really an unlevered beta. Calculate
the beta value that is consistent with your actual leverage. The debt beta should be assumed to be zero.
Some WACC Assignment Information!
Here's some information regarding the WACC Assignment: EVA = NOPAT - Dollar Cost of Capital NOPAT =
(EBIT(1-T)) MVA = Market value of equity - Book value of equity
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Solution: WACC, EVA & MVA Assignment