Weighted Average Cost of Capital Discussion

t1. Assume that the risk-free rate increases, but the market risk premium remains constant. Please explain how, if any, this would impact the cost of debt and the cost of equity.

2. Also, suppose a corporation estimates its WACC to be 11%. Explain why the WACC may not be used to evaluate all of its potential capital projects. Be specific and provide brief example(s) to support your point.

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3. Look up on the current news (WSJ, Bloomberg, Forbes etc.) any company-specific event/news which might affect its cost of capital (debt, equity or both). Briefly describe the situation you read about. Which way the cost will be affected? Why? Please, cite the source of the news.

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