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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.
- 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 (Wd). Do you think by increasing the weight on debt (Wd) 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?
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Auditing Employee Hiring And Staffing
Authors: Kelli W. Vito
1st Edition
0894137034, 978-0894137037
