How would you expect the weighted average cost of capital (WACC) to differ if you had used market values of equity rather than the book value of equity, and why?
What would you expect would happen to the cost of equity if you had to raise it by selling new equity, and why?
If the after-tax cost of debt is always less expensive than equity, why don’t firms use more debt and less equity?
What are some of the advantages and disadvantages of raising capital by using debt?
How would “floatation costs” impacted the WACC, and how could they have been incorporated in the formula?