Answer:
- b. A company’s estimate of cost of capital impacts its application in the analysis of new investments that, consequently, affects the value of the firm and shareholders’ wealth.
- d. Companies incorporate the required rate of return in the cost of capital to compensate investors for the components’ risks.
Step-by-step explanation:
A company's estimate of cost of capital, is serious because it is used in the calculations of the returns from a new investment which is used to calculate the value of the firm and its shareholders. They therefore need to make these estimates as accurate as possible.
Companies also incorporate the required rate of return in the cost of capital so that the investors who provided this capital, can be ensured of a return on their investment because it would be accounted for in analysis of new investments.