question - The passage below require analysis and break down

The weighted average cost of capital (WACC) refers to the firms after-tax cost of capital sources such as bonds, long-term debt, and preferred and common shares (Boundless Finance, 2019). WACC is used to determine the interest that the corporation will pay for each type of capital borrowed. Interest rate is one of the main tools of monetary policy utilized by the Federal Reserve Bank (the Fed) to manage the economy, and it considerably impacts the components of WACC (Brigham, Ehrhardt, Nason, & Gessaroli, 2016). The Fed monitors inflation, unemployment, and investment rates to change the long-term interest rates. Such variations usually affect the propensity to spend, lend, or invest in the economy, which ultimately leads to adjustments in the risk-free rate, which in turn impacts the WACC. Consequently, the firm might incur reduced or higher capital costs in comparison to the initial projections due to changes in interest rates (Brigham et al., 2016). The company must review its total cost of debt since it typically responds to adjustments on the interest rate as made by the Fed. Therefore, since a mix of debt and equity is needed to finance investment projects, a rise in interest rate mostly makes repayment of loans, bonds, and share dividends more expensive. Management needs to avoid mistakes while approximating the WACC; for instance, the coupon rate on the current debt must not be considered as the cost of debt before taxation while doing the calculation. Such an error arises since the particular cost refers to the interest rate payable by the corporation when it seeks debt financing at present-day (Brigham et al., 2016). Additionally, the present risk-free rate and a historical average return on stocks must not be used together while projecting the market risk premium for interest rates on capital.