Question: Read and assess the implications in the attached HBR article reprint "Do You Know Your Cost of Capital" and prepare the following reply in a report format (Word doc, minimum 1 page in length):
1. What is the range of investment horizons (in years) that the authors identified? What are the implications of such a wide range on the decision making process?
2. Is there a general consensus on what the risk free rate is or should be? Why does that matter?
3. For the calculation of debt to equity ratios, summarize the various approaches observed by the authors. What impact does the selection of a given approach have? Which do you believe would be the best numbers to use in the D/E calculations?
4. In summary, what concerns you most about what the authors identified? How would you suggest we can achieve "convergence" and is that a worthy goal?