1. Assigning discount rates to individual projects based on the risk level of each project:
Will prevent the firm's overall cost of capital from changing over time.
Will cause the firm's overall cost of capital to decrease over time.
Negates the firm's goal of creating the most value for the shareholders.
Decreases the value of the firm over time.
May cause the firm's overall weighted average cost of capital to either increase or decrease over time
2. With firm commitment underwriting, the issuing firm:
Is unsure of the total amount of funds it will receive until after the offering is completed.
Retains the financial risk associated with unsold shares.
Is unsure of the number of shares it will actually issue until after the offering is completed.
Knows upfront the amount of money it will receive from the stock offering.
Knows exactly how many shares will be purchased by the general public during the offer period.