Financial Management: Principles and Applications, 13/e

Study Questions

1. 14–1. What is a firm’s WACC?

2. 14–2. Describe the three-step process for estimating WACC.

3. 14–3. What are the basic sources of financing included in a firm’s capital structure? Specifically, what financing sources are excluded from the firm’s capital structure when calculating firm WACC?

4. 14–4. Looking back at Regardless of Your Major: Understanding the Role of the Cost of Capital on page 446, what should be the opportunity cost of funds in valuing the cash flows from the ownership of a McDonald’s franchise? How would you respond to your friend after having read the entire chapter? Remember that your friend is a complete novice when it comes to finance, so try to be very clear in your guidance.

5. 14–5. What are the pros and cons of ...