1. What determines the value of an economic asset?
2. If we know the projected cash flows from loan notes and theircurrent market value, what approach would we take to deducing thecost of the loan notes?
3. Why does it seem likely that businesses have a target gearingratio?
4. What is wrong with using the cost of the specific capitalused to finance a project as the discount rate in relation to thatproject?
5. When calculating the weighted average cost of capital (WACC)should we use market values or balance sheet values as the weightsof debt and equity? Explain
