Think about Unit VII and the importance of understanding the cost of capital to a business. Comment on why it is important, and explain why as debt increases (in capital structure), eventually the WACC will increase (despite the fact debt is usually the lower cost component cost of capital). How does your current or past company, or one you know of, decide on its cost of capital? Finally, What assignments/assessments from this course aligned with your profession? How can the lessons you have learned positively affect your career success (now or in the future)?
Textbook: Titman, S., Keown, A. J., & Martin, J. D. (2014). Financial management: Principles and applications (12th ed.). Upper Saddle River, NJ: Pearson.
Assignment 2 – Please respond to my classmate discussion response below:
According to Titan, Keown, & Martin (2014), WACC includes the cost of capital (costs of borrowing money), taxes, and the cost of raising capital from common stockholders.
Generally speaking, the cost of capital is decided for a company when the cost of capital is up there is a loss for the project. If the cost of capital is down, there is value and gives the go ahead for investment (Jacobs & Shivdasani, 2012).
At the moment, this class and the information given will be new for me in the business. I hope to use the balance sheet and its information in the future with event planning. The other information has familiarized me for possible upcoming discussions I may be involved in.
Jacobs, M. T. & Shivdasani, A. (2012). Do you know your cost of Capital? Retrieved from https://hbr.org/2012/07/do-you-know-your-cost-of-c…
Titman, S., Keown, A. J., & Martin, J. D. (2014). Financial management: Principles and applications (12th ed.). Upper Saddle River, NJ: Pearson.
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