You have graduated with your MBA from UCW, and have been asked back to lecture. You...

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You have graduated with your MBA from UCW, and have been asked back to lecture. You are told to fully, and comprehensively, explain cost of capital to students. As a reminder here is the formula for weighted average cost of capital: WACC = (²) x₂ + Xre xrax (1 - Tc) There are five terms, or components in this calculation, each is highlighted in a different colour. QUESTION 1 (15 POINTS) Fully explain what each term means or represents, and how to calculate it if appropriate. There are five terms, so make sure you explain each and every one. QUESTION 2 (2 POINTS) Your students are evaluating a new investment project (building a Silver mine) for Company A (which is an IT Hardware business, and has no mining operations whatsoever). Your students have calculated the WACC for Company A and want to apply it as the discount rate in their NPV analysis on the silver mine project. What guidance do you provide to your students in this respect? You have graduated with your MBA from UCW, and have been asked back to lecture. You are told to fully, and comprehensively, explain cost of capital to students. As a reminder here is the formula for weighted average cost of capital: WACC = (²) x₂ + Xre xrax (1 - Tc) There are five terms, or components in this calculation, each is highlighted in a different colour. QUESTION 1 (15 POINTS) Fully explain what each term means or represents, and how to calculate it if appropriate. There are five terms, so make sure you explain each and every one. QUESTION 2 (2 POINTS) Your students are evaluating a new investment project (building a Silver mine) for Company A (which is an IT Hardware business, and has no mining operations whatsoever). Your students have calculated the WACC for Company A and want to apply it as the discount rate in their NPV analysis on the silver mine project. What guidance do you provide to your students in this respect?

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Question 1 The weighted average cost of capital or WACC is the average rate of return that a company must earn on its investments in order to maintain its current market value The WACC is calculated u... View the full answer