Summary FIN Module 8 CT FIN300 – Principles of Finance for the Private Sector Latest

NORTH SEA OIL Executive Summary The data compiled by North Sea Oil contains information relative to the current costs of its sources of external capital which includes long term debt of 7%, preferred stock of 19%, and common stock equity of 20%. The company’s target capital structure based on the weighted average cost of capital involves 25% of long term debt, 25% of preferred stock, and 50% of common stock and retained earnings. There are two projects that are under evaluation for possible investment opportunities. The first project referred to as Project A has a total required investment of $130,000 with cash inflows over 5 years and a pay-back period of 3.5 years. The second project referred to as Project B has a total required investment of $85,000 with cash inflows over 5 years and a pay-back period of 2.3 years.