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What are the limitations of the weighted average cost of capital?
Wiki User
∙ 9y ago
One limitation of the weighted average cost of capital is that a firm may possibly end up having a negative Net Present value. This occurs if the weighted average cost of capital gives a discount rate that is too low.
Wiki User
∙ 9y ago
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Why is Weighted Average Cost of Capital important to an organization?
imoportant of capital cost to a hotel imoportant of capital cost to a hotel
Who sets weighted average cost of capital?
It must be the managers
A firm's cost of finaning in an overall sense is equal to its?
Weighted average cost of capital.
How are the weights determined to arrive at the optimal weighted average cost of capital?
estimates
What is after tax wacc?
WACC stands for weighted average cost of capital. So after tax means cost of capital after taxes are taken into account.
What is after-tax wacc?
WACC stands for weighted average cost of capital. So after tax means cost of capital after taxes are taken into account.
What are the various bases for determining the proportions to be employed in calculating the weighted average cost of capital?
i have to study
What is the difference between WACC and cost of capital?
Cost of capital is that amount which is incurred by business to acquire cost for working capital or business while WACC(Weighted average cost of capital) is that cost which is calculated if there is more than one type of capital is involved by business to arrange finances for business.
How do free cashflows and weighted average cost of capital interact to determine a firms value?
they interact because of the gravity
If a company's debt is low does marginal cost of capital apply?
Weighted average cost of capital includes cost of debt and cost of equity. Thus irrespective of existing proportion of debt and equity, the marginal cost is always applicable.
Conceptual difference between marginal cost of capital and weighted average cost of capital?
WACC is the total average cost of capital to company which is calculated by taking into account the weights of all type of capital existed at a particular date in the capital structure of the company (Equity, Debt, bonds, debentures etc). while the MCC is the incremental cost of capital which comes into existence when fresh capital is raised. It will depend on the type of capital raised, its weight and its cost.
When is it appropriate to use a firms weighted average cost of capital?
It is appropriate to use a firm's weighted average cost of capital when valuing a cash flow for the firm. For example, given an investment opportunity where an initial outflow is followed by a series of cash inflows, the company must determine the investments value in present terms to ascertain whether the investment is a viable option for the corporation. The quantify the present value of the future cash flows, the company will use its weighted average cost of capital since this number will embody the required rate of return to meet or exceed the company's cost of financing.
