While valuing a firm, how do we account for the impact of leverage in 3. The FCF to Firm approach b. The FCF to Equity approach Questions on WACC: a. How should the weights on debt and equity be determined when estimating WACC? (Discuss the choices betwee leverage measures based on book value versus market values and current capital structure versus optimal/target market structure b. How should the cost of debt be estimated? What will be the source of information: Firm's latest financial statement or current market data? Explain your choice. c. In estimating the cost of equity using the CAPM, how would you estimate: i. Risk-free rate - Provide details about the security (maturity, etc.) ii. Market Risk Premium iii. Beta for a publicly traded firm and for a non-traded entity like a startup that is about to do an IPO or the division of a company