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?