Two Discussion Questions Financial Risk and Reward, Cost of Capital

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fnen11

Business Finance

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Discussion 1

Financial Risk and Reward

Watch the two videos listed below on the topics of financial risk and reward. Imagine you can interview the presenters and ask one question about financial risks and rewards. What question would you ask? Why do you feel that is an important question?


Discussion Question 2

Cost of Capital

Corporations often use different costs of capital for different operating divisions. Using an example, calculate the weighted cost of capital (WACC). What are some potential issues in using varying techniques for cost of capital for different divisions? If the overall company weighted average cost of capital (WACC) were used as the hurdle rate for all divisions, would more conservative or riskier divisions get a greater share of capital? Explain your reasoning. What are two techniques that you could use to develop a rough estimate for each division’s cost of capital? Your initial response should be 200 to 250 words.

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Explanation & Answer

please find the attached file. i look forward to working with you again. good bye

Running head: FINANCIAL RISK, REWARD AND COST OF CAPITAL

Financial risk and reward, cost of capital
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1

FINANCIAL RISK, REWARD AND COST OF CAPITAL

2

Q1. Shouldn’t high debts increase productivity within the company incurring the debt?
This is an important question as the video leads us to understand that high debts lead to low
productivity. To help us better comprehend the scenario it uses a picture of a game in which the
player uses different speeds to kill the rats. As the speed moves from normal to moderate to high
it is noted that the number of kills slowly drops with the highest speed showing a kill of just 6
rats. He uses the illustration to explain that high debts are bound to result into low productivity...

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