Cost of Capital - Subjective Questions

1. How does the cost of debt differ from the cost of equity in terms of calculation and implications for a company's capital structure decisions?
2. Discuss the factors that influence a firm's cost of equity. How might these factors vary across industries and over time?
3. When evaluating investment projects, why is it important for a company to consider its weighted average cost of capital (WACC)? How does WACC impact project selection?
4. Compare and contrast the concept of the nominal cost of capital with the real cost of capital. How does inflation play a role in these calculations?
5. Explain the relationship between risk and the cost of capital. How does a company's risk profile impact the cost of both debt and equity?
6. In the context of multinational corporations, how does the cost of capital vary across different countries and currencies? What challenges does this pose for global investment decisions?
7. Discuss the concept of the marginal cost of capital. How does it differ from the average cost of capital, and why might a company consider using the marginal cost of capital for certain decisions?
8. How do taxes influence a company's cost of debt and cost of equity? Explain the concept of the after-tax cost of debt and its significance in financial decision-making.
9. What is the role of the risk-free rate in calculating the cost of equity? How might changes in the risk-free rate impact a company's overall cost of capital?
10. Consider a scenario where a company is considering a project with a higher cost of capital than its average cost of capital. Under what circumstances might this project still be considered viable, and how can the company justify such a decision?