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Discuss the detailed steps of how to calculate the weighted average of cost of capital (WACC). How to determine the weight of each financing source.

  • Discuss the detailed steps of how to calculate the weighted average of cost of capital (WACC).

  • How to determine the weight of each financing source.

  • How to estimate the firms cost of debt, cost of equity, and cost of preferred stock. Explain the specific methods.

  • Suppose the firm estimates its WACC to be 10%.

  • Should the WACC be used to evaluate all its potential projects, even if they vary in risk? Explain.

  • Would the NPVs change if the WACC changed? Explain.

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