Question

What impact does the use of Debt have on the Weighted Average Cost of Capital and why?

Which Capital Budgeting evaluation method with which you are most familiar?  Which method(s) are used in companies with which you are familiar (i.e., your existing or previous employer)?

How important is Capital Budgeting (aka the Business Development process) to the maintenance and creation of products and jobs in the economy?

Answer 1

What impact does the use of Debt have on the Weighted Average Cost of Capital and why?

After borrowing all that can be borrowed, the entity seeking funds sells some stock, which is more expensive than debt. Now, an increase in debt after the stock has been sold would normally decrease the Weighted Average Cost of Capital because debt is cheaper than equities for fund raisers.

Which Capital Budgeting evaluation method with which you are most familiar?  Which method(s) are used in companies with which you are familiar (i.e., your existing or previous employer)?

The most commonly used methods for capital budgeting is the net present value technique.

How important is Capital Budgeting (aka the Business Development process) to the maintenance and creation of products and jobs in the economy?

Capital budgeting is the process of determining which long-term capital investments are worth spending a company's money on, based on their potential to profit the business in the long-term. "Capital," in this context, means investments in long-term, fixed assets, such as capital investment in a building or in machinery. The "budget" refers to the plan that details anticipated revenue and expenses related to the investment during a particular time period, often the duration of a project. Capital budgeting is important to businesses' long-term stability since capital investment projects are major financial decisions. These projects often involve large amounts of money. Making poor capital investment decisions can have a disastrous effect on a business.