Individual Research Question. Why is “WACC” important in the valuation of a company? (Research Paper Sample)
The assigned question is : "Why is “WACC” important in the valuation of a company?"
The requirement is here:
"Individual Research Question
Each student will be assigned a research question to prepare a report. The length of the report will be a maximum of three (3) pages explaining an answer(s) to the assigned question. This answer(s) is meant to cover a research review of the topic, any important definitions and how it is important to working capital management. "
I want you help me research and analysis this question, and write it almost 3 pages.
I upload the syllabus and slides the professor used in class, and my assigned question is :"Why is “WACC” important in the valuation of a company?", and this is individual research question assignment.
Importance of WACC Valuation
An organization that is raising funds from various sources of finances has the responsibility of giving returns to its providers. A firm's Weighted Average Cost of Capital (WACC) refers to the combined burden expense of assets acquisition from various sources to be used in the firm operations. Each type of capital is compared to the total capital as a percentage and the sum of these percentages combined altogether. It is to be noted that these creditors expect to be compensated on every penny invested in a firm or project. Calculating WACC is therefore inclusive of all sources of capital which includes common stock, preferred stock. Firms need to make their investment decision and evaluate projects that have different risks. The calculation of critical metrics like economic value-added and net present value involves WACC. WACC is equally important to investors who are making valuations of firms.
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