1) When discussing the limitations of WACC. Please describe the implication of such a calculation when a firm is considering adding to its capital structure. [Hint: You may want to use a numerical example].
2) In your own words, why is the implication of part a) so unrealistic? [Hint: Again, you may want to use a numeric example].
3. Jand, Inc., currently pays a dividend of $1.54, which is expected to grow indefinitely at 6%. If the current value of Jand’s shares based on the constant-growth dividend discount model is $41.41, what is the required rate of return?