Question $7$

When exploring the Weighted Average Cost of Capital $($WACC$)$ we were introduced to the fundamental components that firms use to estimate their hurdle rate. Berk and DeMarzo $(2020)$ interviewed Shelagh Glaser, the then VP of finance and the controller at the Client Computing Group at Intel about their WACC estimates $($see page $434).$ In this interview, she highlighted the inputs that her firm uses to calculate their WACC and provides numerous examples of inputs that they must consider when they re$-$estimate their WACC each year. Highlight two of these inputs and indicate how changes in these inputs are likely to impact Intel$$s hurdle rate; in addition, illustrate how these changes impact the projects that a firm accepts. Include at least two citations that support your response.

Question $8$

Figures $15\mathrm{.}7$ and $15\mathrm{.}9$ in Berk and DeMarzo $(2020)$ highlight a couple of interesting findings. The first is that certain industries are more likely two have firms that utilize more debt or leverage in their capital structures when compare against others, why is this? Second, firms tend to underutilize debt, which led some to believe that they are not acting in the firm$$s best interest and maximizing firm value; the counterpoint is that increased leverage leads to greater financial distress and by avoiding financial distress they are maximizing firm value. Take one side of this argument and defend that perspective.