1. Which specific capital elements should be included in SIVMED's WACC? Should pre- or post-tax values ​​be included? Should historical or new values ​​be used? Why? Answer: The WACC covers the calculation of SIVMED's cost of capital where each capital category is weighted proportionally. The entire capital base – common shares, preferred shares, bonds or any other long-term loans – should be listed in SIVMED's WACC. We determine the WACC by multiplying the cost of the corresponding capital component by its proportional weight and then adding: where: Re is a cost of equity capital Rd is a cost of debt E is a market value of the company's equity capital D is a market value of the company's debt V is equal to E + DE/V is a percentage of the equity financing D/V is a percentage of the debt financing Tc is a corporate tax rate In general , SIVMED's activities are financed by choosing between debt or equity. The WACC is the average of the costs of these financing sources, each of which is weighted according to its respective use in the given situation. By taking a weighted average, SIVMED can determine how much interest the company must pay for each dollar used. Shareholders are interested in the cash flows available to them, after paying corporate taxes. Therefore, we must use the after-tax WACC. The cost of capital is mainly used to make decisions that involve raising new capital. Therefore, applicable component costs are current marginal costs but not historical costs.2. What is your estimate of SIVMED's cost of debt?a. The cost of debt is the money the company has to pay for the use of the funds. In our case, the annual cost of debt is kd: kd/2 = r = 5.0%. kd/2 = (47.5 + [1000-891] / 30) / ((2*891 + 1000) / 3) = 5.5% We need to multiply t...... half of the sheet.... .. value, however, depreciation affects values ​​such as operating profit and the value of the company's assets. If depreciation is ignored, net income calculations will be incorrect.10a. Answer: The corporate cost of capital should be used by both divisions, however, adjustments should be made for market risk, volatility (different sectors have different betas) and project peculiarities.11a. Answer: (WACC Book Value) Debt = 61.2 / 155.7 = 39% Preferred Stock = 15 / 155.7 = 10% Common Stock = 79.5 / 170.8 = 51% 2. Answer: (WACC Book Value) market WACC) Debt = 30% Preferred stock = 10 % Common stock = 60% C. Answer: The weighted average cost of capital determines the marginal cost of issuing new securities to finance projects. Such securities should be issued at market value. Therefore the weights assigned to debt and equity in determining the WACC should be based on market value.