Objective: Describe and compute the weighted cost of capital (WACC) to include the components of WACC.

For the past several weeks, you have been looking at the topics as an investor, the supplier of funds. In this next section, you will be looking at how users, particularly companies, determine the cost of obtaining funds. The cost will be what the suppliers of funds require in return for letting the companies use their funds to implement projects. In this forum, you will be discussing how risk affects the required rate of return that debt and equity investors demand from a company, impacting the company's WACC.

• Answer the following questions in your discussion on how both the financial market and a company's management can impact the cost of obtaining funds for a company.
  • How do financial markets determine the required rate of return that a company must provide debt and equity investors?
    • Why would the rate change? Hint: Review the Efficient Market Theory.
  • Does a company's management have any control over the company's WACC?
  • Why may the company's overall WACC differ from a project's WACC?
    • Should it be different?

ANSWER DETAILED PLEASE