Final answer:
The question does not provide sufficient details to calculate the firm's weighted average cost of capital (WACC) since the capital structure and cost of equity are missing. However, it does present financial concepts about investment returns and effective interest rates after incorporating societal returns. The WACC formula considers the market values of equity and debt, the costs of equity and debt, and the benefit of the tax shield on interest payments.
Step-by-step explanation:
To calculate the firm's weighted average cost of capital (WACC), we need to evaluate the cost of each component of the capital, including debt and equity, and then take a weighted average of these costs. The original question does not provide information about the firm's capital structure or equity costs, which is necessary to create a complete calculation of the WACC. However, it corrects some financial calculation concepts that may or may not be related to the WACC.
One instance mentioned is an example of a firm that could invest $183 million assuming it incorporates a societal return of 5%, which reduces its effective rate of return from 9% to 4%. For question 39, the scenario described is an investment consideration. It's stated that if the firm doesn't need to borrow cash, the 6% rate of return on the investment suggests that it should proceed because it's above the firm's internal funding cost, which would be 0% since it isn't borrowing. When borrowing is considered, an 8% loan interest would exceed the investment return, so it wouldn't be favorable to move ahead in that case.
Ultimately, the formula for WACC is this: WACC = (E/V) * Re + ((D/V) * Rd * (1-T)), where: E is the market value of equity, V is the total market value of equity and debt, Re is the cost of equity, D is the market value of debt, Rd is the cost of debt, and T is the tax rate. This formula incorporates the tax shield on debt—meaning the WACC takes into account that the interest payments on debt are tax-deductible.