In preparation for a meeting with your client Proptech PLC and its accountants you have been asked to prepare a note in which you:
(a) Calculate the Weighted Average Cost of Capital (WACC) of Proptech PLC using the capital asset pricing model and relevant information in the Appendix. Please show the sub-calculations made to arrive at the final figure clearly.
You are advised to avoid rounding figures until you arrive at the WACC figure itself at which point please round to the nearest 2 decimal places.
(8 marks)
(b) Please read the Appendix to this assessment.
Proptech PLC has expansion plans which involve significant investment. Decisions will be taken using net present value, internal rate of return and payback valuation methods.
(i) Explain fully if, how and why WACC will be used in the calculations.
(ii) Critically evaluate the usefulness and relevance of using WACC in the calculations.
(12 marks)
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