Topic 1:

When the WACC formula is applied to cost of capital the outcome seems to imply that debt is “cheaper” than equity; this implies that a firm with more debt could use a lower discount rate. Does this make sense? Explain your answer.

Topic 2:

Corporations often consume natural resources in our society. Overuse or mining of such natural resources can lead to problems in the natural world. In addition, our society has been using technology to improve a corporation’s position, either financially or through improved resource allocation. In this assignment you are to research a real world issue and create a solution to the problem. You should:

1.     Identify a problem in our natural world that is the result of overuse or by over mining of one or more natural resources to advance a corporation.

2.     Prepare a summary that includes the negative effects on the natural world, how technology was used, and the benefit to the corporation.

3.     Add an additional summary to propose a solution using technology to solve the problem. Explain how the proposed solution continues to benefit the corporation financially. Your summary should also show how this solution could create a significant improvement in the natural world.

The goal of this assignment is to use your critical thinking skills to identify a problem and propose a solution that leaves the corporation and the environment in the best shape possible with the help of technology. This discussion will require that you include resources using APA format.

According to M&M Proposition 2, which of the following conditions would maximize the value of a firm?

The fraction of a firm’s total financing that is represented by debt is a measure of its

Financial policy matters because

A firm plans to issue $700,000 worth of debt at a YTM of 7.5%. The debt is trading at par. The firm’s marginal corporate tax rate is 30%. What is the present value of the tax savings in perpetuity?