Explain the meaning of capital structure, cost of capital, and weighted average cost of capital (WACC).
Order Instructions
Overview
This journal activity is private between you and the instructor.
In this course, journal activities allow you to simulate actual activities in the field of finance. For example, you are asked to create emails related to specific scenarios. The sender, recipient, and subject line for these emails are not a focus of this activity. Instead, this activity focuses on the substance within the body of the email itself.
Prompt
Before completing this activity, review Chapters 14 and 15 of your textbook. In this scenario, imagine that you are a financial analyst at the corporation you selected for your final project, and one of your peers from a non-financial department is confused about why capital structure is important. You have been asked to explain the topic in terms that are not too technical. In an email memo to your peer, address the critical elements below.
Specifically, the following critical elements must be addressed:
Explain the meaning of capital structure, cost of capital, and weighted average cost of capital (WACC).
Describe how capital structure and cost of capital affect the way that a company is valued by investors.
Utilize vocabulary and explanations suitable for a non-expert in finance to understand the communication.
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