1. Which is the more difficult input to estimate when calculating the Weighted Average Cost of Capital (WACC), debt or equity? Briefly explain why?

2. (3 points) Why are there so many different adjustments and inputs used by industry professionals when calculating the WACC? Provide at three example and explain.

3. (4 points) CK Tech, a technology company, has had a 20% rate of growth for five consecutive years and has produced steady positive cash flows. The most recent economic and technology sector indicators show signs of slowing growth. CK Tech recently announced the issuance of bonds totaling 40% of the companys current market cap. What would be a possible reason CK Tech has decided to raise capital this way? Explain why it is or is not an appropriate financing method for this organization?

Bonus question (2 point)

(2 points) The financial analysis function in Bloomberg for a stock is:

1. FAN
2. ANA
3. FA
4. FIN

1. (1 points) Which of the following factors is least likely to influence an organization's cost of capital? a) General economic conditions b) Credit rating of the organization's securities c) Amount of financing the firm requires d) The exchange on which the firm's stock is traded 2. (1 points) The Weighted Average Cost of Capital (WACC) can be used by an organization as a: a) measure of profitability b) benchmark c) leading indicator of inflation d) beta estimate 3. (1 points) The debt-to-equity ratio reflects the ability of shareholder equity to cover outstanding debt. a) True b) False 4. (1 points) The price a company's stock is trading at has no impact on the cost of capital for a company raising capital. a) True b) False 5. (1 points) Two companies in the same industry, producing similar products and comparable capital structures are openly traded. The primary difference between the two is one has a large market cap and the other is much smaller. Would you expect the smaller company to have a larger or smaller beta than the larger company? a) Smaller b) Larger