Confirm the below calculations. Compare how the below calculated WACC is different than 4.36%. Explain how the different WACCs impact the NPV for the Electro-bicycle project. 

Calculations for Optimus' required rate of return on equity using the capital asset pricing model (CAPM). Based on my last name the BETA is 1.20

Formula Optimus

Rf 4.0%

Rmkt 6.0%

B 1.20

Required Return = Rf + B (Rmkt)

Required Return = 0.04 + 1.20 (0.06)

Required Return = 0.04 + 0.072

Required Return = 0.112 or 11.2%

Calculation of Optimus' WACC with feeding of 40% debt and 60% common stock. With the debt having after-tax cost of 4%.

WACC = (Wd) (after-tax cost of debt) + (We)(Ke)

WACC= (0.4)(0.04)+(0.6)(0.112)

WACC = 0.016 + 0.0672

WACC = 0.0832 or 8.3%

Answer rating: 100% (QA)

Your calculations appear to be correct Heres a breakdown 1 Required Rate of Return on Equity Ke Usin... View the full answer