Weighted Average Cost of Capital
Description
Discuss three practical considerations that would guide you through selecting an optimal capital structure for your firm. Rank these considerations from the most important to the least important. Explain why you chose this ranking.
The weighted average cost of capital (WACC) is an important tool for the capital structure. Go to the website Yahoo! Industry Summary and select two firms within the same industry. The industry may be that in which you currently work or it may be an industry that interests you. Calculate the WACC for the two firms. How do the WACCs compare? Are the WACCs what you would expect? What causes the differences between the two firms’ WACCs?
