Business – discussions

Business – discussions

1. There is a discussion relating to the dangers of applying firm-wide WACC (Weighted Average Cost of Capital) to projects the firm might undertake. The greater the potential project the firm is considering varies from the firm’s core business, the greater the risk of the project being successful. Identify and discuss at least two qualitative factors that comprise this risk.

Business – discussions

2. From your own knowledge and any independent research you pursue, discuss the pros and cons of the three main sources of capital: equity, preferred stock and debt. If you were a business owner and looking to raise a small amount of capital, what would your optimal capital structure be? Why? How would your preference change if you were raising a vast amount of capital?

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