Question 1

(a) What is meant by the Weighted Average Cost of Capital? There are often situations where the cash flows under consideration have risks that are distinctly different from those of the overall firm. Explain two approaches companies might take to account for these situations. (8 marks)

(b) Explain what is meant by a unitary board structure. How does this differ from a twotiered board structure? If all else was equal, as an investor, would you rather invest in a company with a unitary or a two-tiered board structure? Explain why. (8 marks)