Purchase Solution

Usage of WACC

Not what you're looking for?

Ask Custom Question

Suppose a firm estimates its WACC to be 10 percent. Should the WACC be used to evaluate all of its potential projects, even if they vary in risk? If not, what might be "reasonable" costs of capital for average-, high-, and low-risk projects?

Purchase this Solution
Solution Summary

The solution is very well explained and detailed. The OTA does an excellent job of explaining all the steps needed to get to the right answer. The solution is easy to understand as well. Overall, an excellent response.

Solution Preview

Please see my response below. I have done my best to answer your questions to the best of my ability. I hope you find the response excellent. Please let me know if you have any other questions or comments. Thanks and good luck.

WACC will ...

Purchase this Solution
Free BrainMass Quizzes
Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

Basics of corporate finance

These questions will test you on your knowledge of finance.

Employee Orientation

Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

View More Free Quizzes
Related BrainMass Solutions

  • WACC : Weighted Average Cost of Capital

    Broadly, the assets of a company are financed by either debt or equity. WACC is the average of the cost of each of these sources of financing weighted by their respective usage in the given situation.

  • balboa bottling company

    It is expected to economize the electric power usage, labor and repair costs, as well as to reduce the number of defective bottles. In total, an annual savings of $255,000 will be realized if the new machine is installed.

  • Finance Decision-Making : Contribution Margin Ratio CVP ( Cost-Volume-Profit ), Incone Statement Equation, Bonds, Coupon Interest Rate, Cash Flow, Risk Management and WACC

    capital (WACC).

  • Multiple choice

    265649 2 MC Finance Questions: Compute WACC; normal cash flows 1. A project has an up-front cost of $100,000. The project's WACC is 12 percent and its net present value iss $10,000. Which of the following statements is most correct? a.

  • MCQ on capital budgeting

    MIRR is calculated by investing the intermediate cash flows at project's WACC. Therefore, MIRR is affected by WACC. Payback period does not use any discount rate; hence WACC has no role to play in the calculation of WACC.

  • WACC Explanation and analysis

    Company's WACC= Post tax Cost of Debt* Proportion of debt + Cost of Equity* Proportion of Equity It represents the cost of funds raised by the company.

  • What is meant by Weighted Average Cost of Capital (WACC)?

    209965 Weighted Average Cost of Capital (WACC) Definition a. What is meant by Weighted Average Cost of Capital (WACC)? b. What are the components of WACC? c. Why is WACC a more appropriate discount rate when doing capital budgeting? d.

  • Weighted Average Cost of Capital

    Weighted average Cost of Capital = E/V * Cost of Equity + D/V * cost of debt * (1-tax rate) Answer A - Mullineaux's WACC WACC = 60%*14 + 5%*6 + 35%*8*(1-0.35) WACC = 8.4% + 0.3% + 1.82% WACC = 10.52% Answer B Lets analyse to following situations

  • WACC

    We take each of the option rates of return greater or equal to the WACC - If the rate of return in greater of equal to WACC, then the NPV will be >=0. When the rate of return is the same as WACC, then NPV is zero.

  • cost of common stock that you would use in the WACC formula

    417802 cost of common stock that you would use in the WACC formula Describe how you would calculate the cost of common stock that you would use in the WACC formula? How are the weights derived that are used in the WACC formula?

View More Related Solutions