The authors write, "Historically, many have failed to recognize their true cost of capital. Only by recognizing and accounting for the true cost of capital is a firm prepared for the future. Failure to account for the true cost of capital reduces the ability of not-for-profits to serve their market area. Indeed, it imperils their very existence."

a. Give an example from your experience where failure to understand the true cost of capital reduced your firm's ability to be successful? Would calculating and understanding WACC have helped, or were these calculations performed and were deemed ineffective?

b.Since much of the WACC calculation incorporates variables such as taxes, stockholder expectations, or equity as defined by current market value of stock, does one use WACC in the nonprofit world? Or is there an alternative?

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a In my experience failure to understand the true cost of capital impacted a project where our firm ... View the full answer