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Due Wednesday 12.12.18 at 06:00 PM Attempts: Keep the Highest: /6 1. The weighted average cost of capital Aa Aa The importance of knowing a firm's cost of capital Cost of capital Summary In 2010 the Federal Reserve Board (the Fed) reported that nonfinancial companies in the United States had around $2 trillion in cash and short-term liquid assets. As the U.S. economy was still struggling, consumer spending remained low, and companies resisted in investing in new projects Based on your understanding of the concept of cost of capital, which of the following statements are valid? Check all that apply. The required rate of return for long-term debt capital funding is incorporated separately in project analysis, because it is not included in the weighted average cost of capital (WACC). Companies have free cash flow that is available for distribution, and investors expect to earn a certain required rate of return if it is invested. The company's weighted average cost of capital (WACC) incorporates the required rates of return that investors expect as a compensation for the risk The weighted average cost of capital (WACC) is considered the overall rate expected to generate required returns for investors, but companies do not use it while discounting project cash flows. that would create value for their stakeholders As the economy improves, uncertainty in the markets decreases, and companies will start investing in projects. However, the challenge of analyzing and selecting projects that would generate cash flows and returns and add value to the firm would remain The assumotions in the analvsis about

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