Discussion Forum Week 10 11 (Chapter 10, 11) 1515 unread replies 1515 replies Pick at least one topic from the following list to discuss, and provide insightful comments on your fellow students posts to participate in the discussion When you post your discussion, make sure you write down which topic that you are discussing Thanks The weighted average cost of capital (WACC) is calculated as the weighted average of cost of component capital, including debt, preferred stock and common equity In general, debt is less expensive than equity because it is less risky to the investors Some managers may intend to increase the usage of debt, therefore increase the weight on debt (W d ) Do you think by increasing the weight on debt (W d ) will reduce the WACC infinitely What are the benefits and costs of using a lot of debt Do you think it is necessary for a firm to adjust its overall WACC according to the risk of each individual project Why If a firm insists that it will use only one WACC to evaluate all its projects, what would be the consequence in the long term Compare the commonly used capital budgeting methods NPV, IRR and MIRR Explain why NPV profiles of different projects can cross over What kind of projects tend to have steeper and flatter NPV profile What is the implication of the slope of NPV profile

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Discussion Forum: Week 10-11 (Chapter 10, 11) 1515 unread replies.1515 replies. Pick at least one topic from the following list to discuss, and provide insightful

Discussion Forum: Week 10-11 (Chapter 10, 11)

1515 unread replies.1515 replies.

Pick at least one topic from the following list to discuss, and provide insightful comments on your fellow students posts to participate in the discussion. When you post your discussion, make sure you write down which topic that you are discussing. Thanks!

The weighted average cost of capital (WACC) is calculated as the weighted average of cost of component capital, including debt, preferred stock and common equity. In general, debt is less expensive than equity because it is less risky to the investors. Some managers may intend to increase the usage of debt, therefore increase the weight on debt (W_d). Do you think by increasing the weight on debt (W_d) will reduce the WACC infinitely? What are the benefits and costs of using a lot of debt?

Do you think it is necessary for a firm to adjust its overall WACC according to the risk of each individual project? Why? If a firm insists that it will use only one WACC to evaluate all its projects, what would be the consequence in the long term?
Compare the commonly used capital budgeting methods: NPV, IRR and MIRR.
Explain why NPV profiles of different projects can cross over? What kind of projects tend to have steeper and flatter NPV profile? What is the implication of the slope of NPV profile?