Mini-case chp 10 - Solutions Chapter 10 Mini-Case November...

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Unformatted text preview: Solutions Chapter 10 Mini-Case November 4, 2011 Nick Mulder i573515 a. 1) The sources of capital that need to be included for estimating the WACC, in Harley Davis Industries' case mainly concerning long-term capital investment decisions, are both common and preferred stock and long term debt. Additionally, they can include short-term debt such as short-term interest-bearing debt and non-interest bearing liabilities. Non-interest bearing liabilities are typically not included in the WACC estimate because it is seen as a net capital expense. Use of short-term interest-bearing debt for more then just working capital needs would require an additional short-term debt component for the WACC estimate. a. 2) After-tax dollars because this is the primary source of cash flows that concern stockholders, in the form of dividends and reinvestments. a. 3) Only today's marginal costs are of importance because cost of capital concerns current decisions regarding new capital....
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Mini-case chp 10 - Solutions Chapter 10 Mini-Case November...

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