1. we are asked that:

(A). Why is it important to use marginal weights in calculating a weighted average cost of capital?

(B). Under what circumstances is it appropriate to use the weighted average cost of capital as an acceptance criterion?

(C). Do the funds provided by sources such as accounts payable and accruals have a cost of capital? Explain.

(D). What will happen to the cost of debt funds for cost of capital purposes if a company should go into a period when it has negligible profits and pays no taxes?

(E). With a dividend discount model, how do you estimate the cost of equity capital? What is the critical variable in this model?

(F). What is the critical assumption inherent in the capital-asset pricing model (CAPM) as it relates to the acceptance criterion for risky investments?