Reference no: EM131441930

Question: Factors that affect the WACC equation 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? Check all that apply. The firm's capital structure The general level of stock prices The effect of the tax rate on the cost of debt in the weighted average cost of capital equation The impact of cost of capital on managerial decisions Consider the following case: Wellington Industries 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 percentage if it was operated as an independent company. Division His the company's high-risk division and would have a weighted average cost of capital of 14 percentage. 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 percentage. Division His considering a project with an expected return of 12 percentage. Should Wellington Industries accept or reject the project? Accept the project Reject the project On what grounds do you base your accept-reject decision? Division H's project should be accepted, as its return is greater than the risk-based cost of capital for the division Division H's project should be rejected since its return is less than the risk-based cost of capital for the division.