Essay specific features
June 13, 2016
No of pages / words:
5 / 1225
Rating of current essay:
Tax rate was 34%.
From the formula:
Rwacc = Equity/(Equity+Debt)*Rs + Debt/(Equity+Debt) * (Rb*(1-tc))
Rwacc = 0.5*10% + 0.5*7.9% = 9%
There maybe issue with the future debt – equity ratios being used as opposed to the current ratio. However we think it is right to use the forecasted ratio rather than the current ratio...
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The target weights are expected to prevail over the life of the firm or project. Conversely to define the weights of debt and equity, Pioneer should look at market value, because it is closer to the real world. In some instances for short term projects, the market values would be helpful.
Pioneer should continue to use multiple divisional hurdle rates in evaluating projects and allocating investment funds among divisions...
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