Why is it important to estimate a firm's cost of capital? What does it represent? Is the WACC set by investors or by managers?

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  The formula used for calculating WACC includes cost of equity, which can be challenging to calculate because equity does not pay a set return to its investors and can vary from year to year.

• 1. What if funds are blocked? How does this affect the parent company? 2. From the perspective of the subsidiary, what if the subsidiary provided the funds? 3. How does the source of capital affect the subsidiary and the parent company? 4. What source(s) of capital would minimize the cost of capital to the subsidiary?

  Thus it is used to know the rate of return expected by the investors.

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  Thus it is used to know the rate of return expected by the investors.