The concept of after-tax weighted average cost of capital (WACC) is a foundation

The concept of after-tax weighted average cost of capital (WACC) is a foundation when assessing cost of capital and investment options. The assessment will present the opportunity to assess a financing transaction and build upon your understanding of this cost of capital concept and demonstrate your ability to calculate the after-tax WACC.
Read the scenario and address the checklist items below.
Scenario: You are an angel investor who has been approached by an entrepreneur to assess an investment opportunity.
An entrepreneur asks for $100,000 to purchase a diagnostic machine for a healthcare facility. The entrepreneur hopes to maintain as much equity in the company as possible, yet as the angel investor, you require the transaction to be financed with 60% debt and 40% equity.
As the angel investor, you assign a cost of equity of 16% and a cost of debt at 9%. Based on Year 1 sales projections, the entrepreneur assures you a return on investment (ROI) of 9%; conceptually this will cover the first year’s pretax cost of debt and allow for planned equity growth and a refinancing model for Year 2. You will use an after tax weighted average cost of capital (AT- WACC) model which includes the after-tax cost of debt and proportionate costs of debt versus equity. A 35% marginal tax rate is applied.
Address the following checklist items:
Explain the tax benefits of debt financing.
Calculate the AT-WACC with a 60% debt and 40% equity financing structure.
Apply the calculated AT-WACC to explain why this is or is not a viable investment for you as the angel investor.
Explain a financial restructuring AT-WACC (given changes to proportions of % debt versus % equity financing) that would create a positive ROI.
Explain why you as the angel investor would require more or less debt versus equity financing. Be sure to note the role of the Unified Commercial Code-1 (UCC-1) document in this transaction and the order of claim on assets in times of a bankruptcy.
Include a strong thesis statement, introduction, and conclusion. The main points of the response should be developed and explained clearly with appropriate financial and accounting terminology.
Your paper must be in a minimum 2-page APA 7th formatted Microsoft® Word® document, be in APA 7th format, and include a title page and reference page.
Your paper must include correct grammar, punctuation, and spelling.
Your paper must be written in Standard English and demonstrate exceptional content, organization, style, grammar, and mechanics.
Your paper should provide a clearly established and sustained viewpoint and purpose.
Your writing should be well ordered, logical, and unified, as well as original and insightful.
You should paraphrase the material and use in-text citations to justify your discussion. Avoid using quotations. Ensure you are properly paraphrasing from your sources.
You must use at least one scholarly, high quality, and current Library source in addition to your course materials. Peer-reviewed academic articles, articles published in journals, textbooks, and library resources found in the “ProQuest ABI/Inform Collection” database from the Library are examples of high-quality resources.
Respond to the questions in a thorough manner, providing specific examples of concepts, topics, definitions, and clear explanations of appropriate financial and accounting terminology. Your paper should be highly organized, logical, and focused. Include a strong thesis statement, introduction, and conclusion.
Be sure to include references for all sources and cite them using in-text citations where appropriate. Use your textbook, the Library, and/or the Internet for research.
Your paper submission should:
include a title page;
be double-spaced;
be typed in Times New Roman, 12-point font; and
be free of spelling or punctuation errors.

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