AES

Case Questions:

Note: Use the following questions to guide your case analysis report, which should be a
complete piece of work. Follow the instructions about format on the syllabus. Further,
the following questions should all be addressed in your report but should not be the
constraints limiting your thoughts.

1. How would you evaluate the capital budgeting method used historically by AES?

2. What is an appropriate required rate of return for AES to use around the world?
(Hints: 1. In other words, this question leads you to estimate the WACC ; 2. You may
want to use the capital asset pricing model (CAPM) to estimate the cost of equity)


3. Does this make sense as a way to do capital budgeting? (i.e. this question asks you
to evaluate your proposed new methodology)

Note:
1.The case did a good job guiding you to calculate WACC, please make sure you read
the case thoroughly before you try to make an analysis.
2. I uploaded a spreadsheet to help you answer the above questions and analyze the
case. You do not have to use it, but I provide it just in case you dont have any clue so
that you at least have something to start with.