Skip to ContentGo to accessibility pageKeyboard shortcuts menu
OpenStax Logo
Principles of Finance

Video Activity

Principles of FinanceVideo Activity

Calculating the Weighted Average Cost of Capital

Access multimedia content
1 .
What is the formula for calculating WACC? What do each of the components of this formula represent?
2 .
In the video, the tax rate for Brick and Mortar Co. was 30%. What would your calculation of the company’s WACC be if there was a change in the tax code and the tax rate for Brick and Mortar Co. fell to 15%? Why does the tax rate impact a firm’s WACC? Do you think the managers of Brick and Mortar Co. should consider making any changes to its capital structure if the tax rate falls to 15%? Why or why not?

Capital Structure for Real Estate Companies

Click to view video content

3 .
Why doesn’t one optimal capital structure exist for commercial real estate businesses?
4 .
How do you think a family that runs a multigenerational commercial real estate business will think about risk compared to a young entrepreneur who is beginning to build a commercial real estate business? How do you think the capital structures of these two entities are likely to compare? How would those capital structures likely be linked to the risk profiles of the two companies?
PreviousNext
Order a print copy

As an Amazon Associate we earn from qualifying purchases.

Citation/Attribution

This book may not be used in the training of large language models or otherwise be ingested into large language models or generative AI offerings without OpenStax's permission.

Want to cite, share, or modify this book? This book uses the Creative Commons Attribution License and you must attribute OpenStax.

Attribution information
  • If you are redistributing all or part of this book in a print format, then you must include on every physical page the following attribution:
    Access for free at https://openstax.org/books/principles-finance/pages/1-why-it-matters
  • If you are redistributing all or part of this book in a digital format, then you must include on every digital page view the following attribution:
    Access for free at https://openstax.org/books/principles-finance/pages/1-why-it-matters
Citation information

© Jan 8, 2024 OpenStax. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution License . The OpenStax name, OpenStax logo, OpenStax book covers, OpenStax CNX name, and OpenStax CNX logo are not subject to the Creative Commons license and may not be reproduced without the prior and express written consent of Rice University.