When discussing the limitations of WACC

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1. Assume that you contribute $300 per month to a retirement plan for 15 years. Then you are able to increase the contribution to $600 per month for another 25 years. Given a 6 percent interest rate, what is the value of your retirement plan after the 40 years?

2. Bat Company's BBB 11% bonds have a face value of $1,000 and pay interest semi-annually. They mature in 21 years, and their YTM is currently 15%. What is the price of a Bat Company Bond?

3. When discussing the limitations of WACC. Please describe the implication of such a calculation when a firm is considering adding to its capital structure. [Hint: You may want to use a numerical example].

Reference no: EM131925175

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