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Submitted by susie22782003 on Thu, 2012-06-28 13:20
due on Mon, 2012-07-02 13:17
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MT217 Unit 7 Discussion

Capital budgeting involves decisions about whether or not to invest in fixed assets, and it has a major influence on firms' future performances and values. Discounted cash flow analysis is used in capital budgeting, and a key element of this procedure is the discount rate used in the analysis. Capital must be raised to finance fixed assets, and this capital comes from different sources: debt, preferred stock, and common equity. Each of these capital components has a cost, and these cost rates, along with the target proportions of each, are used to calculate the firm's weighted average cost of capital or "WACC."

Go to http://ro.uow.edu.au/commpapers/317/. In the middle of the page, click on the link for "Download the Document" (PDF Format). This will open a new document in Adobe Acrobat. Read the article titled "A Comparison of the Weighted Average Cost of Capital for Multinational Corporations: The Case of the Automobile Industry Versus the Soft Drink Industry."

After you have completed the above, answer the following question:

Identify some problem areas in the cost of capital analysis. Do these problems invalidate the cost of capital procedures we are discussing in this unit?

Answer
Submitted by shahimermaid on Thu, 2012-06-28 22:28
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problem areas in the cost of capital analysis with respect to the research paper

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xxxx context of xxx paper, xxxx can be xxxxxxx as

xxxx has xxxx xxxxxxxxxx - xxxx xx debt, cost of equity, tax rate and capital structure.

the paper xxxxxxxxx xxx industries- xxxx drink xxx xxxxxxxxxxxx

In soft xxxxx industry, there are 4 companies in xxx world xxxx xxxxxxx xxx xxxxxxxx xx the market. When we xxxxxxx xxxxx WACC, xxxxx xx difference due to diffidence xx xxx rates of xxxx xxxx vary due to the fact that xxxx xxx xxxxxxxxxxx xx xxxxxxxxx xxxxxxxxxx

xx automobile industry, 6 xxxxxxxxx xxxx xxxx xxxxxxxxxx xx xxx xxxxx
cost of capital xxxxxx xxxxxx xxx xxxxxxxxx xxx xxxxxxxxx xx xxx same industry.

xxx xxx company xxx xxx xx a project xx various xxxxxxxxxx xx should choose the xxx where xxxx xx capital is xxxxxxxx

when xxx xxxxxxx xxxxxxxx in xxxxxxx xxxxxxxxxxxx

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Answer
Submitted by Asma on Thu, 2012-06-28 13:25
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I hope it will help you

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xxxx of capital xxxxxxxxxx the xxxxxxxxxxx xxxx xx xxx capital. xx is weighted average cost of all xxx sources of xxxxx xxxx xx xxx xxxxx xxxxxxx xx funds xxx xx xxxxxxx xxxx or xxxxxxxxx stock. xxxx of xxx xxxxxxx areas xxxx
1) xxxxxxxxxx the xxxx of equity involves xxx of assumptions. For xxxxxxx xxxxxxxxxxx of xxxxxx rate xxx xxxxxx cash xxxxx have xx be done to xxxxxxxx xxx xxxx xx xxxxxxx xxxxx xxxxxxxxxxx may xx xxxxx due xxxxxx xx external environment.
xx Market values may change drastically xxxxxxxxx the xxxx xx xxxxxxxx
3) xxxx xxxxxxx xxx xxx xx considered xxxxx calculating the xxxx of capital
These xxxxxxxx xxxxxxx invalidate the cost xx xxxxxxx but tells about xxx limitations xx xxx xxxxxxxxxxx xxx


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