What does WACC stand for?
A. Weighted Average Cost of Collecting
B. Weighted Average Cost of Closing
C. Weighted Average Cost of Capital
D. None of the Above
The full form of WACC is Weighted Average Cost of Capital
Answer -> C. Weighted Average Cost of Capital
What does WACC stand for? A. Weighted Average Cost of Collecting B. Weighted Average Cost of...
A firm wants to create a weighted average cost of capital (WACC) of 10.4 percent. The firm's cost of equity is 14.5 percent and its pre-tax cost of debt is 8.5 percent. The tax rate is 34 percent. What does the debt-equity ratio need to be for the firm to achieve its target WACC? Stiect one: 0 a. 0.51 O b. 0.57 O C. 0.62 d. 0.70 e. 0.86
1.What is (WACC), why is it used? 2. Why the weighted average cost of capital (WACC) is used in capital budgeting? 3. Estimating the costs of different capital components—debt, preferred stock, retained earnings, and common stock? 4. How to combine the different component costs to determine the firm’s WACC? 5. Cost of Equity: CAPM, what is it used for?
1. 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 (Wj) will reduce the WACC infinitely? What are the benefits and costs...
What is the weighted average cost of capital (WACC) and Why is it different from the rate of return to investors? Explain with examples.
1. The basic WACC equation The calculation of WACC involves calculating the weighted average of the required rates of return on debt, preferred stock, and common equity, where the weights equal the percentage of each type of financing in the firm’s overall capital structure. ____ is the symbol that represents the cost of raising capital through retained earnings in the weighted average cost of capital (WACC) equation. Bryant Co. has $2.7 million of debt, $1 million of preferred stock, and...
In your own words, define each of the following terms: Weighted average cost of capital, WACC; after-tax cost of debt, rd(1 - T); after-tax cost of short-term deb, rstd(1 - T) Cost of preferred stock, rps; cost of common equity, rs. Target capital structure Flotation cost, F; cost of new external common equity, re How can the WACC be both an average cost and a marginal cost? Distinguish between beta (i.e., market) risk, within-firm (i.e., corporate) risk, and stand-alone risk...
The approach to computing a divisional weighted average cost of capital (WACC) uses the average beta of projects in each division to calculate the WACC. Multiple Choice 1111
What is WACC (weighted average cost of capital) and how do companies make financial decisions based on it?
The instructor said reasons why a company’s Weighted Average Cost of Capital (“WACC”) is critically important include:______. a. the WACC is the minimum rate of return to be earned on Common Stock. b. the WACC is the rate of return which must be earned by the Common and Preferred Stockholders. c. the WACC is the minimum rate of Free Cash Flow return to be earned on Total Assets. d. the WACC is the maximum amount of financial costs a company...
15 . Solving for the WACC The weighted average cost of capital (WACC) is used as the discount rate to evaluate various capital budgeting projects. However, it is important to realize that the WACC is an appropriate discount rate only for a project of average risk. Consider the case of Turnbull Company. Turnbull Company has a target capital structure of 58% debt, 6% preferred stock, and 36% common equity. It has a before-tax cost of debt of 11.10%, and its...