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Identify some problem areas in the cost of capital analysis

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Q1. Identify some problem areas in the cost of capital analysis. Do these problems invalidate the cost of capital procedures.

Q2. Suppose a firm estimates its cost of capital for the coming year to be 10%. What are reasonable costs of capital for evaluating average-risk projects, high-risks projects and low-risk projects?

Q3. How should a manager determine the capital structure weights that are used to calculate the WACC?

Q4. What are the likely effects of a policy in which a company fails to adjust for differences in risk when estimating the cost of capital for their various projects?

Reference no: EM132993101

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