a. What is Weighted Average Cost of Capital (WACC)? Identify TWO (2) factors that affect the WACC of a company.
b. Would the firm's cost of external equity capital be the same as the required rate of return on the firm's outstanding common stock? Why or why not?
1- Using debt can help reduce the agency problem that may arise between the management of a company and its shareholders. Explain.
2- Explain the effects of the following on the company's weighted average cost of capital:
i) Floatation cost
ii) Reduction in corporate tax