Question 1: In what sense is the WACC an average cost? A marginal cost?
Question 2: A company's 6% coupon rate, semiannual payment, $100 par value bond that matures in 30 years sells at a price of $515.16. The company's federal-plus-state tax rate is 40%. What is the firm's component cost of debt for purposes of calculating the WACC? (hint: Base your answer on the minimal rate.) Please provide your solution with the steps. Financial calculator should be used.
Question 3: Explain why the NPV of a relatively long-term project, defined as one for which a high percentage of its cash flows are expected in the distant future, is more sensitive to changes in the cost of capital than is the NPV of a short-term project.
Question 4: A project has an initial cost of $52, 125, expected net cash inflows of $12,000 per year for 8 years, and a cost of capital of 12%. What is the project's NPV?