Finding the weighted average cost of capital


Question 1: What is Weighted Average Cost of Capital (WACC)? Identify TWO (2) factors that affect the WACC of a company.

Using debt can help reduce the agency problem that may arise between the management of a company and its shareholders. Explain.

Question 2: Explain the effects of the following on the company's weighted average cost of capital:

i) Floatation cost
ii) Reduction in corporate tax

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Finance Basics: Finding the weighted average cost of capital
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