His boss, B Brown, is examining the future prospects of XXX as a potential investment. Joe Rivera, chief financial officer (CFO) of XXX, recently specified that the company's weighted average cost of capital (WACC) has improved in recent months. Rivera also specified that this change would influence XXX's ability to accept future equity investments. Brown has asked him to explain these statements by the CFO.
Instructions:
Write a memo to explain the components of a company's WACC.
State how an increase in the cost of capital influences the viability of future capital investment alternatives.