1. why do you think Howard Sloan wants to estimate the firm's hurdle rate? Is it justifiable to use the firm's weighted average cost of capital as the divisional cost of capital? Please explain.
2. How should Roseanne go about figuring out the cost of debt? Calculate the firm's cost of debt.
3. Comment on Roseanne's assumptions as stated in the case. How realistic are they?
4. Why is there a cost associated with a firm's retained earnings?
5. How can Roseanne estimate the firm's cost of retained earnings? Should it be adjusted for taxes? Please explain?