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FIN 370 Week 4 Assignment, Weighted Average Cost of Capital (Vestor Corp)

As an investment banking firm we have been asked by Vestor Corporation to assess whether or not Vestor should invest in a new capital investment that is a new warehouse facility which they believe will generate an internal rate of return of 11.5%. In order to appropriately answer whether or not Vestor Corporation should make this investment we must first determine if the Internal Rate of Return (IRR) is greater than the Weighted Average Cost of Capital (WACC).  If the IRR is greater than the WACC then cash flow increases which adds to shareholders equity and the investment should be made.