[Get Solution]Viking Freight Forwarding
Produce a report from Betram, the financial vice president to the Ostrems outlining the process for determination of which projects should be accept. In analyzing the projects, you should be doing the following: Compute the estimated Beta for VKF using the company and market returns and then compute cost of equity using CAPM. Note the appropriate return for market and risk free is the geometric mean not arithmetic mean. Compute the weighted average cost of capital for the firm given the current capital structure and after computing the relevant costs for after-tax long-term debt and equity.. Simply, without consideration for the life of the projects, calculate NPV, IRR, PI and MIRR for each project using the current cost of capital, note that the Ankeny proposal is riskier. Assume the reinvestment rate for MIRR is the weighted average cost of capital for the firm. Based on your computations in requirement number two, which projects should be accepted? Note: Projects 1245-A, 1245-B and 1245-C are mutually exclusive. Since Projects 1245-A, 1245-B and 1245-C are mutually exclusive and have unequal lives it is appropriate to use other techniques to evaluate the projects. Use the equivalent annuity approach and the replacement chain approach as better techniques for evaluating these three projects. Does this change your decision? Why? .
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