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  • How would you expect the weighted average cost of capital (WACC) to differ if you had used market values of equity rather than the book value of equity, and why?
  • What would you expect would happen to the cost of equity if you had to raise it by selling new equity, and why?
  • If the after-tax cost of debt is always less expensive than equity, why don't firms use more debt and less equity?
  • What are some of the advantages and disadvantages of raising capital by using debt?
  • How would "floatation costs" impacted the WACC, and how could they have been incorporated in the formula?

 

 

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