Explain why the weighted average cost of capital (WACC) is used in capital budgeting.

Posted: February 3rd, 2023

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Investigate different factors that influence the valuation of equity and in your report assume the CAPM is used to form the Weighted Average Cost of Capital (WACC). Write a research report that outlines the topics –
Determine how diversification is important in the formation of CAPM.
Provide numerical illustrations for CAPM.
Research the validity of CAPM.
Use information technology to complete academic writing and research.
Present written information in a persuasive, organized, clear, and concise manner relying on research, data, and analytics.
Use acceptable paragraph and sentence structure with minimum grammar, punctuation, and spelling errors; and demonstrate appropriate word choice, tone, and format.
Explain and calculate the costs of different capital components—debt, preferred stock, retained earnings, and common stock.
Explain why the weighted average cost of capital (WACC) is used in capital budgeting.

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