The Competency Assessment (CA) assesses your level of performance

This is a paper that focuses on the Competency Assessment (CA) assesses your level of performance. The paper also discusses the incorporation of attributes of debt and equity.

The Competency Assessment (CA) assesses your level of performance

To receive credit you must complete the Competency Assessment. You may contact your professor if you have any questions.

This Competency Assessment (CA) assesses your level of performance on the specific outcome(s) that are the focus of this course. The CA requires you to demonstrate your knowledge, understanding, and proficiency of theoutcome(s). Be sure to use the other activities in this course prior to attempting the CA. You can attempt the CA an unlimited number of times within the term.

Be sure to review the Competency Assessment Checklist Rubric in order to understand the criteria on which you willbe evaluated.

Instructors will provide feedback on the CA. If you expect to receive feedback, revise, and resubmit this CA near the end of the term, you will need to make your submission no later than 5 days before the end of the term.

Please refer to your syllabus for additional Competency Assessment requirements
Assessment: The Angel Investor

This Competency Assessment assesses the following outcome:

MT480M6: Incorporate the combined attributes of debt and equity given a cost of capital model.

The concept of after-tax Weighted Average Cost of Capital (WACC) is a common issue when studying finance at all levels. The impact of taxes, applicable to most forms of financing is a key component of studies in the field of finance. The Assessment questions will present the opportunity to assess and build upon your knowledge of and ability to calculate the after-tax WACC and the cost of debt and equity.

The Competency Assessment (CA) assesses your level of performance

Read the fictional scenario and respond to the checklist items in this written Assessment.

Scenario: As an Angel Investor you have been asked to assess an entrepreneur’s product and financing options. In your role as an Angel Investor you focus on one year at a time. The entrepreneur asks for $100,000 immediately to purchase a diagnostic machine for a healthcare facility. The entrepreneur hopes to be financed with 60 percent debt and 40 percent equity. As the entrepreneurs’ venture capital partner, you assign a cost of equity of 15% and a cost of debt at 10%. You require a Return on Investment (ROI) of 8%.
You are using an After Tax Weighted Average Cost of Capital (AT- WACC) model. A 35% marginal tax rate is applied Address the following checklist items:

Checklist:

Firstly, explain the tax benefits of debt financing.
Secondly, calculate the AT- WACC with a 60% debt and 40% equity financing structure.
Thirdly, apply the calculated AT-WACC to explain why this is or is not a viable investment for you as the Angel Investor.
Fourthly, explain what the entrepreneur’s financial restructuring AT- WACC (% Debt and % Equity) need to be in order to create a positive ROI.
Also, explain why you as the Angel Investor would require more or less debt versus equity financing. Be sure to note the nature of the claims on assets in times of a bankruptcy.
Submit your response in a minimum of a 2-page APA formatted Microsoft® Word® document to the Dropbox with additional title and references pages.

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