--%>

Regarding WACC, determine an opportunity cost on project

Regarding the WACC which has to be applied to a project, must it be an expected return, the average historical return or an opportunity cost on similar projects?

E

Expert

Verified

The WACC is neither an expected return, nor an opportunity cost nor an average historical return. This WACC is a weighted average of required returns.

   Related Questions in Corporate Finance

  • Q : Llustrate illiquidity risk and small

    My investment bank told me that beta given by Bloomberg incorporates the illiquidity risk and small cap premium since Bloomberg does well-known Bloomberg adjustment formula. Is it true?

  • Q : Problem on price share and stock

    Brittney and Kim Wan Sun have successfully launched a successful talent agency, ABC. They expect the firm’s earnings and dividends to grow by 20% annually for the next 10 years and they establish a strong base and to grow at a constant 5% per year thereafter. AB

  • Q : Which parameter good measures value

    Which parameter good measures value creation; the Economic Value Added (EVA), the CVA (Cash Value Added) or the economic profit?

  • Q : Vanilla Bonds-Corporate Bonds Define

    Define the term Vanilla Bonds regarding Corporate Bonds?

  • Q : What is the impact of auto portfolio

    What is the impact of auto portfolio into the quotation of the shares?

  • Q : Selling or purchasing problem Atlas

    Atlas Realty Company is interested in buying a house and renting it out for $12,000 a year, collecting the rent in advance each year. This will depreciate the house over 25 years; however sell it after 15 years at twice its purchase price. The maintenance expenditures

  • Q : Benefits of working capital requirement

    Benefits of working capital requirement estimation: • Helps to judge the efficiency of utilization of working capital in generation of sales • Cost of capital aspect

  • Q : Additive risk in the CAPM Suppose that

    Suppose that the two securities APPL and MSFT account for the entire large cap technology component of the S&P 500 (hypothetically – of course – there are really plenty of others). Further, suppose that their weights in the S&P index were as follow

  • Q : Is ROE a correct measurement of return

    The ROE is the ratio among net income and Shareholders’ equity. The meaning of Return on Equity is return to shareholders. Therefore, is ROE a correct measurement of the return to shareholders?

  • Q : Zero coupon bonds problem Shana wants

    Shana wants to purchase 5-year zero coupon bonds with a face value of $1,000. Her opportunity cost is 8.5 %. Supposing annual compounding, what would be the present market price of such bonds? (Round to the closest dollar.) (a) $1,023  (b) $665  (c) $890&nbs