Chapter 9 Mini Case: Cost of Capital and Project Risk
Read the mini-case in Chapter 9 of your text and
Calculate the current weighted average cost of capital for CWC.
Calculate the appropriate discount rate for the healthy bottled water project.
Perform a sensitivity analysis for sales price, variable costs, fixed costs, and unit sales at +/- 10%, 20%, and 30% from the base case.
Perform an analysis of the following two scenarios:
Best case: Selling 2,500,000 units at a price of $1.24 each, with variable production costs of $0.22 per unit.
Worst case: Selling 950,000 units at a price of $1.32 per unit, with variable production costs of $0.27 per unit.
Explain if the firm should undertake the healthy bottled water project.
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