It is important for you to understand the cost of capital and what factors impact the level of costs because firms that can lower costs of capital typically have a better array of investing options and with that more opportunities to increase company value. As a result, all firms should strive to combine their financing mix to the point where the overall WACC is at its lowest point. This way, the lowest cost of financing will allow for a greater variety of investment projects to invest in.

For this discussion, make sure you have completed the Calculating WACC interactive exercise in this unit's study.

Based on your experience with the exercise and the materials for this week, indicate why companies have their own individualized capital structure and resulting WACC.

How does WACC and capital structure affect the attractiveness of the firms to investors?