1. What is the major value of the weighted cost of capital calculation for the firm?
2. Describe "capital structure."
3. How is the fun's weighted cost of capital influenced by the firm's capital structure?
4. Describe the role of the firm's tax rate in cost of capital calculations?
5. Calculate the cost of long-term debt and common equity for Touring Enterprises. Calculate the weighted average cost of capital.
6. Provide an argument for including or not including current liabilities in the cost of capital calculation.
7. Touring Enterprises' capital structure is believed to be optimal. What is the meaning and importance of an optimal capital structure to the cost of capital calculation?
8. What economic circumstances will likely cause a change in the firm's optimal capital structure?
9. Explain the effect of accelerated depreciation versus straight-line upon net income. How does this create *deferred taxes" on the firm's balance sheet?
10. Should Touring Enterprises consider current liabilities as a pan of its permanent financing? Why or why not?