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No External Financing for New Proposals: If a firm have sufficient retained earnings with it as required by the new proposal, then the firm may not raise any external finance. In such situations, the WMCC is equal to the specific cost of capital of retained earnings. For example, a firm has financed 70% of its total requirements by equity shareholders funds (C/C = 13%) and 30% by the issue of 12% bonds (after tax C/C = 6%). The WACC of the firm is:
WACC = .06 x.3 +.7 x .13 = .109 or 10.9%.
However, the WMCC of the firm will be 13% as the new financing is provided only by the retain earnings.
You deposit $500 today in a savings account that pays 3.5% interest, compounded annually. How much will your account be worth at the end of 25 years?
Question 1 Describe the types of investment decisions Question 2 List the main features of ordinary shares Question 3 List the assumptions of Walter's dividend model. Ex
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