Assignment #1: Group Project Capital Budget Management: Developing a Weighted Cost of Capital and Project Budget for a Hypothetical Company. Overview: undertake the task of developing a cost of capital for a hypothetical company and make a budget for a proposed project as part of capital budgeting. Your submission will consist of a comprehensive written report detailing the methodology employed to derive the cost of capital and project budget. Instructions: Part 1: Developing Cost of Capital 1. Company Creation: Develop a hypothetical company for which you will determine the cost of capital. 2. Industry and Market Analysis: Provide an analysis of the industry landscape, your competitive positioning, investor sentiments, and long-term strategic objectives of the company. 3. Cost of Equity Estimation: Estimate the cost of equity for the hypothetical company and provide a detailed explanation of the methodology employed. 4. Cost of Debt Estimation: Estimate the cost of debt for the company and elucidate the process used for estimation. 5. Real Company Comparison: Your estimate basis should come from a real company within the same industry as your hypothetical company. Choose a publicly listed company to analyze their cost of debt, cost of equity, and WACC. Explain how you obtained this data and how you will use it to emulate the cost of capital for your hypothetical company. 6. Weighted Average Cost of Capital (WACC) Calculation: Utilizing the estimated cost of equity and cost of debt, calculate the WACC for the company and justify the weightings assigned to equity and debt. Note: The cost of capital will serve as the discount rate used to calculate the present value of future cash flows in your assignment #2. 7. Limitations and Assumptions Discussion: Discuss any limitations or assumptions inherent in the WACC calculation and their potential impact on the accuracy of the cost of capital estimate. Part 2: Analyzing Hypothetical Projects 1. Project Proposal Creation: Develop two (2) project proposals which are project proposal 1 solar panel manufacturing expansion and project proposal 2 development of wind energy solutions aimed at enhancing company operations, competitiveness, and overall value within the industry. Provide a comprehensive rationale for each proposal. Examples of projects you can have include: a. Expansion Projects: Branching out from the current location to other cities or provinces or expanding physical space to accommodate business growth. b. Replacement Projects: Upgrading equipment, software, or systems, renovating stores, or replacing vehicles to improve efficiency and effectiveness. c. New Project Launches: Introducing new products, services, or product lines, launching e-commerce platforms, or expanding into new markets such as educational tools or mobile banking. d. Capacity Increase Projects: Equipment/hardware Upgrades, additional fulltime employees, expanding physical space, implementing automation solutions, expanding cloud infrastructure, or increasing facilities to meet growing demand. e. Cost Reduction Initiatives: Implementing lean development practices, upgrading energy-efficient equipment, automating processes, or optimizing the supply chain to reduce costs. f. Strategic Investments: Engaging in mergers and acquisitions, establishing research and development facilities, hiring specialized talent, or acquiring new technologies to drive innovation and growth. g. Green Projects: Initiatives aimed at reducing environmental impact and promoting sustainability, such as implementing renewable energy sources, improving energy efficiency, reducing waste generation, or adopting eco-friendly practices throughout operations. 2. Project Budget Analysis: Outline and describe the expenses associated with each project proposal, detailing the projected costs involved in implementation. Provide a breakdown of project expenses. Example: Accounting Software Automation Initiative Project Initiative Cost/Expenses: Research and Development (R&D) Software Licensing Hardware and Infrastructure Enhancement Consultation and Professional Services Data Integration Cost Maintenance and Support Expense Training and Development Initiatives Operational Cost Cloud Expenditure Testing Expenditure Salary Adjustments (due to workload increase) Workforce Expansion (Part-time/Full-time) (IT Support, IT Outsourcing, Operation Employees) 3. 5-Year Cost Estimate: Estimate the implementation costs for each project proposal over a period of five years, providing a detailed breakdown of expenses for each year. 4. Resource Citing: Ensure all project expense estimates are supported by relevant resources and third-party collaborations, with proper citation of sources.