BUS401 Week 4 DQ 1 & 2

BUS401 Week 4 DQ 1

In the video segment, you will watch an interview with two great investors of the twentieth century.  Imagine you are Harry Reasoner, and you are allowed to ask Peter Lynch one question about market risk, discount rates, or the weighted average cost of capital (WACC). What question would you ask?  Why do you feel that is an important question?  

                 BUS401 Week 4 DQ 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?