wacc practice exam 3 Q9

wacc practice exam 3 Q9 SCH I just did this Schw practice exam 3 Q9, but Q said DC plan. Not DB plan, did we not learn that there is not much burden on emplyer or company becaz the risk is owed to the emoloyee. 100% equities ; Valuation / optimal structure: so I said Valuation does not change caz it is DC. and it is optimal structure for this co as many employees are young. Pls, anyone who has idea , help !

only the 2nd part was for a DC plan? the first part was looking for impact on capital structure of firm given the 100%/0% equities in the DB plan. (i.e. pension plan = DB plan; DC plan is not a pension plan…it’s a DC plan/savings plan)

Hi, thanks. Yes the first part was DB but the 9B was for DC. Checked, it is 9B. Comment on Weekly’s decision to add a defined contribution plan. (that is DC! ) Specifically address the key features of the DC plan from the perspective of Smithj hospital , and employee. So I still think the company’s DCplan would not affect the co’s wacc … …

oh ya, the 2nd part wasn’t asking about the WACC, just the pros/cons of DC from employer/employee perspective. The only cons for employer is compliance/admin stuff (i.e. offer enough funds etc…)

OOOOOH ! prockets you are right. I ve been thinking about this for so many hours, gee thanks,