Big Old Serious Supermarket (BOSS) is a retail company that manages a chain of supermarkets, operating solely in the US market. The company has issued common stock equity and bonds to finance its operations. Those are its only sources of capital. After the onset of the pandemic and its fallout on the economy, several changes occurred in the US economy and financial markets. What is the potential impact of each one of the following changes on the weighted average cost of capital (WACC) of BOSS? (assume that everything else remains constant.) i. The US Federal Reserve Bank lowered the reference interest rate. ii.The annual expected return for the S&P 500, the benchmark index for the US stock market, was revised downwards.
Big Old Serious Supermarket (BOSS) is a retail company that manages a chain of supermarkets, operating solely in the US market. The company has issued common stock equity and bonds to finance its operations. Those are its only sources of capital.
After the onset of the pandemic and its fallout on the economy, several changes occurred in the US economy and financial markets. What is the potential impact of each one of the following changes on the weighted average cost of capital (WACC) of BOSS? (assume that everything else remains constant.)
i. The US Federal Reserve Bank lowered the reference interest rate.
ii.The annual expected return for the S&P 500, the benchmark index for the US stock market, was revised downwards.
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