Fundamentals of Corporate Finance. The Weighted-Average Cost of Capital and Company Valuation.
1) Define capital structure.
2) What is the company cost of capital formula (WACC)?
3) What is Hot Rocks Corp WACC if debt was 45% and equity was 55% of total liabilities and shareholders' equity with the expected return for debt of 8% and expected return for equity of 19%?.
4) Why are the effect of taxes important in determining the WACC rate?
5) Do the Weighted-Average Cost of Capital uses market or book value?
6) what are the two costs of debt financing? Which one is explicit and which one is implicit?
7) Which company had the highest WACC score? Which company had the lowest WACC score?
8) Is it appropriate for the interest rate on the debt used to finance the project be the same as the discount (opportunity cost of capital) rate? Why or why not?
9) What is free cash flow?.
10) Do financial managers produce detail cash flows for the short period and estimates for the long period?