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Why do firms compute weighted-average costs of capital

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Reference no: EM1321193

Question #1:  Why do firms compute weighted-average costs of capital?

Question #2:  You need to estimate the value of a company with the following data:

  • The firm's WACC is 9.0%
  • The firm is forecasting that next year's operating cash flow (depreciation plus profit after tax) to be $70 million.
  • Investment expenditures will be $32 million.
  • Thereafter (next year), operating cash flows and investment expenditures are forecast to grow by 3.5% a year.

Based on this information what is the total value of this company?

Question #3 How can a manager calculate the opportunity cost of capital for a project?

 

 

Reference no: EM1321193

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