(1)
total capital=10^9+8*10^8+5*10^8+10^10=1.23*10^10
return on common stock=3.25%+1.7*(9.75%-3.25%)=0.143
WACC=10%*10^9/1.23*10^10+0.143*(8*10^8+5*10^8)/1.23*10^10+6%*10^10/1.23*10^10*(1-30%)=0.0574
(2)
Evaluation of projects with similar risks – When a new project with similar risks is the same as an existing project in the same industry, companies often use the WACC as a benchmark to decide whether the project should proceed.
Financial and real estate companies with less self-owned funds cannot use WACC.
WACC also cannot be used if the floating cost of marginal capital and financial risk are considered
