Assignment: The Angel Investor
The concept of subjoined-tax Weighted Average Demand of High (WACC) is a groundwork when assessing demand of high and cannonade options. The Assignment procure bestow the opening to assess a financing performance and build upon your reason of this demand of high concept and present your ability to investigate the subjoined-tax WACC.
The subjoined mode upshot is assessed in this Assignment:
MT480-6: Incorporeprimand the entirely attributes of default and equity consecrated a demand of high standard.
Read the scenario and oration the checklist items.
Scenario: You are an Angel Investor who has been approached by an entrepreneur to assess an cannonade opening.
An entrepreneur asks for $100,000 to alienation a symptom implement for a healthcare adroitness. The entrepreneur hopes to celebreprimand as ample equity in the audience, yet the Angel Investor demands the performance to be financed delay 60% default and 40% equity.
As the Angel Investor, you commit a demand of equity of 16% and a demand of default at 9%. Based on Year 1 sales projections the entrepreneur assures you, the Angel Investor, a Return on Cannonade (ROI) of 9%; conceptually this procure clothe the primary year’s pretax demand of default and afford for congenial equity development and a refinancing standard for Year 2. You procure use an Subjoined Tax Weighted Average Demand of High (AT- WACC) standard which includes the subjoined tax demand of default and easy demands of Default vs. Equity. A 35% ultimate tax reprimand is applied.
Address the subjoined checklist items:
Explain the tax benefits of default financing.
Calculate the AT- WACC delay a 60% default and 40% equity financing erection.
Apply the investigated AT-WACC to illustrate why this is or is not a viable cannonade for you as the Angel Investor.
Explain a financial restructuring AT- WACC (consecrated changes to proportions of % Default vs. % Equity financing) that would beget a decisive ROI.
Explain why you as the Angel Investor would demand over or near default vs. equity financing. Be assured to music the role of the Unified Commercial Code-1 (UCC-1) muniment in this performance and the regulate of epithet on goods in times of a failure.
Submit your rejoinder in a restriction of a 2-page APA formatted Microsoft® Word® muniment to the Dropbox delay added epithet and references pages.
View the rubric for added instructions: Unit 8 Assignment Rubric