Analyzing the business investment

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In thinking about how WACC is used in business, what is one business idea that you think WACC would help in analyzing the business investment. Additionally, how would you go about in using WACC to help facilitate that investment making process?

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When market indices soar to ever dizzying new highs and seem divorced from reality, it is time to get back to the fundamentals. Specifically, it is time to look at a key aspect of share valuations: the weighted average cost of capital (WACC). A company`s capital funding is comprised of two components: debt and equity. Lenders and shareholders expect a certain return on the funds or capital they have provided. The cost of capital is the expected return to equity owners (or shareholders) and to debtholders. So WACC tells us the return that both stakeholders can expect. WACC is useful in determining whether a company is building or shedding value. Its return on invested capital should be higher than its WACC.

ffeinated energy drinks (CEDs) are beverages that contain high levels of caffeine, stimulants, and often other substances such as taurine and sugars (NCCIH, 2018). High dose of sugar is used in these drinks in other to make it sweet and also sugar is considered a form of energy boost. Red Bull and Monster are one of the most popular energy drinks among children, adolescents and young adults (Breda, 2014). In advertisements, CEDs are said to increase the level of energy of an individual, focus and also keep them wide awake. This has led to the increase in the consumptions of these drinks. According to a study done in Ontario, about half of adolescents have had an energy at least once in the year. (NCCIH, 2018). Evidence have shown that energy drinks can lead to serious health impacts in children and teenagers. Also, studies have shown a rise in visits to emergency rooms due to energy drink overdose among adolescents (NCCIH, 2018). About a half of adolescents who consume energy drinks experienced unfavourable effects such as unsteadiness of the hands (Pound, 2017). A lot of health professionals have shown concerns over the adverse effects of CEDs most especially among children and adolescents. This is due to the high caffeine content which could lead to cardiovascular and neurological issues. Also, the high level of sugar could lead to obesity and even liver problems (Ibrahim, 2014). This is why some countries have banned energy drinks in the past or considered banning them.

According to studies, Health Canada implemented rules to be followed in a bid to regulate the consumption of caffeinated energy drinks such as limiting the amount of caffeine to “180mg per single serving” and “a concentration of 400mg/ L” (Canadian Paediatric Society, 2017). A ban was also placed on marketing of CEDs to children and adolescents. Mandatory labelling that goes in accordance with the Food and Drugs Act which includes the amount of caffeine from all sources, advisories on mixing beverage with alcohol, Nutrition Fact and ingredient lists among others (Canadian Paediatric Society, 2017).

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