• • 1. Create a unique hypothetical weighted average cost of capital (WACC) and rate of return.

    2. Recommend whether or not the company should expand, and defend your position.

    Let’s take moment and look at medical needs since COVID-19 has changed what we think of as normal life. Normally when we get sick, we take for granted that we can go to the doctor and all supplies and medicine needed are right at our finger tips. We have seen that change recently. Walgreens bought USA Drugs in 2012 and Rite Aid in 2015. What if they decided to expand and buy smaller mom and pop pharmacies? Let’s say they had a WACC of 11%. The mom-and-pop pharmacies they are planning to undertake would provide a ROR of 15% but you do not think that this project is a good investment for Walgreens. What logical argument would you use to persuade Walgreens to decline the project despite the high rate of return? Before you dive into this, I know a few students have a hard time with this discussion. So, I want you to first figure out and understand what WACC is. After you understand what that is then you can come up with the ROR and explain what your company should do and why. Because we are looking at rate of returns in this as well as investment, I want everyone to be able to relate. The biggest investment that most will ever make is in buying a home. I think many of you will also find this article interesting as you have bout home or may be in the process of buying one. Right now, it is a sellers’ market because interest rates are low. If you have time this week here a good read to make you think a little.

    
    

  •