Weighted average cost of capital for investment

Assignment Help Business Management
Reference no: EM131064332

Instructions: Corporations often use different costs of capital for different operating divisions. Using an example, calculate the weighted cost of capital (WACC). What are some potential issues in using varying techniques for cost of capital for different divisions? If the overall company weighted average cost of capital (WACC) were used as the hurdle rate for all divisions, would more conservative or riskier divisions get a greater share of capital? Explain your reasoning. What are two techniques that you could use to develop a rough estimate for each division's cost of capital? Your initial response should be 200 to 250 words.

Question:

My business Nicki Appleseed Inc. needs to upgrade office building which will cost $40,000. In order for us to fund this project my company will have common stock for $20,000 with an expected return of 8%, I will also issue preferred stock of $10,000 with an expected return of 14% as well as bonds for $10,000 that I will pay 5% interest on. What is the weighted average cost of capital for the investment?

Reference no: EM131064332

Questions Cloud

Modelled as poisson distributions include : ? The number of deaths by horse kicking in the Prussian army (this was the first application and was made famous by a book of Ladislaus Josephovich Bortkiewicz (1868-1931));
Aftertax return for the year : Now suppose that dividends are taxed at 15 percent and long-term capital gains (over 11 months) are taxed at 30 percent. What is your aftertax return for the year?
Innovative concrete maintenance techniques : Describe what the project is all about. What are you going to do? Describe the existing system / any problem or issues, which require this project to be undertaken.
In what ways is illegal immigration an intergovernmental : In what ways is illegal immigration an intergovernmental issue?
Weighted average cost of capital for investment : What are two techniques that you could use to develop a rough estimate for each division's cost of capital? Your initial response should be 200 to 250 words.
Company assigned-avery dennison corp : Analysis of Historical Performance (revenue and market share for 5 years) and Implications for Financial Management. Discuss the reasons (external and internal) for the yearly changes in the data.
Cost of retained earnings : Luzhny Corporation has a target capital structure of 25% bond financing, 20% preferred stock financing, and 55% common equity financing. The cost of bonds is 7%, the cost of preferred stock is 12%, the cost of retained earnings is 15%, and the cos..
Binomial model statistical evaluation : Here are three examples of people using the binomial in very different contexts. In the first case the Water Authority is using it to test if standards have been breached, the second sees its use in total quality management and the third applies i..
Conflict that spills across borders why : Keep in mind this can be both conflict between states (e.g. United States versus China) or civil conflict that spills across borders (e.g. Syria/Iraq). Why?

Reviews

Write a Review

Business Management Questions & Answers

  Discuss pros of horizontal organizational structure type

Discuss the pros and cons of each horizontal organizational structure type. Incorporate the video's discussion of Functional structures.

  Communicate the human resources manager at company

Communicate the Human Resources manager at company, division or at another company. Ask the manager to describe the methods they use to verify eligibility prior to hiring

  Major corporate scandalgrad level - briefly explain a major

major corporate scandalgrad level - briefly explain a major corporate scandal in an organization such as enron martha

  Explain the roles and responsibilities of managers

Explain the roles and responsibilities that organizational managers and leaders play in creating and maintaining a healthy organizational culture.

  Finding qualified candidatesyou work for a small business

finding qualified candidatesyou work for a small business that is having trouble finding qualified candidates for a

  What are combinations of institutions through which sellers

What are combinations of institutions through which sellers deliver their product. How is pricing affected by complexity of distribution.

  What is the importance of system documentation

What are some causes of system implementation successes and failures?·

  Economy affected by monetary policy

Describe the impact of China, as an emerging economy on the global economy today. How is the U.S. economy affected by monetary policy

  Presentation on a safety unit

Strat discussing, planning and researching a Safety Unit Presentation - work as a Safety Unit for an industrial company and create a strategy for implementing, maintaining,

  How can the top tier management promote and influence

How can the top tier management promote and influence the lower level management tiers to engage and participate in diversifying their ranks when the top tier management ranks are not diverse?

  Impact of the capital budgeting decision

What's the significance of recognizing the time value of money in the long term impact of the capital budgeting decision?

  What is the market approach to consumer protection

What is the market approach to consumer protection and in what ways does it fall short of completely protecting the consumer?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd