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Why is Weighted Average Cost of Capital important to an organization?
Wiki User
∙ 15y ago
imoportant of capital cost to a hotel imoportant of capital cost to a hotel
Wiki User
∙ 15y ago
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What are the limitations of the weighted average cost of capital?
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.
Who sets weighted average cost of capital?
It must be the managers
How are the weights determined to arrive at the optimal weighted average cost of capital?
estimates
A firm's cost of finaning in an overall sense is equal to its?
Weighted average cost of capital.
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 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 is the capital requirement of universal banks?
Capital requirement is the amount of capital a financial institution is required to hold. The capital requirement for Universal Banks is four percent of their weighted average calculation.
How do free cashflows and weighted average cost of capital interact to determine a firms value?
they interact because of the gravity
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.
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.
What is the most prevelant discount rate used in DCF analyses?
Weighted average cost of capital (WACC) is the dominant discount rate used in DCF analyses.
