Firm cost of capital on managerial decisions

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Factors that affect the cost of capital equation Check all that apply. Interest rates in the economy

Each of the following factors affects the weighted average cost of capital (WACC) equation. Which of the following factors are outside a firm's control?

The performance of index funds, such as the S&P 500

The firm's capital budgeting decision rules

The impact of a firm's cost of capital on managerial decisions

Consider the following case:

National Petroleum Refiners Corporation (NPR) has two divisions, L and H. Division L is the company's low-risk division and would have a weighted average cost of capital of 8% if it was operated as an independent company. Division H is the company's high-risk division and would have a weighted average cost of capital of 14% if it was operated as an independent company. Because the two divisions are the same size, the company has a composite weighted average cost of capital of 11%. Division L is considering a project with an expected return of 9.5%.

Reference no: EM133075742

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