1. Royal Mail is a company that is responsible for performing postal services with
headquarter in the United Kingdom. It was founded in 1516. Royal Mail is not only in
charge of making deliveries but also of collection. This company was registered as a
government entity and remained that way until 2013, when there were changes in the
laws that did not allow it to stay that way. After that change of rules, the British
government acquired 30% of the shares, and finally, in 2015, they decided to sell all their
claims. After the changes that took place due to the sale of shares and the shift from
public to a private company, in 2015, Hilary Hard had a meeting with the senior
management of Royal Mail to discuss the changes to be made for the future of the
company. The company's management wanted to change the way of seeing the business
for the future, stop seeing the company based on the political laws of the government,
and worry more about future investors and current ones too, leaving behind the idea of
focusing on the British population. The main idea was to make changes in the company's
policies; they wanted the shareholders to benefit in the future.
2. The cost of capital is based on the return that a company should achieve. This number
should be equal to or higher than the market value; otherwise, it would be below and not
meet its goals. For investors, this is a critical point because if there is a significant
increase in the cost of capital, the company's value grows, and therefore investors are
satisfied; on the other hand, if the results are below the market, investors will be at risk of
loss. Finally, the cost of capital is a great help for the company to see where they stand
and how to continue to improve and analyze the returns on their investments. As
mentioned above, the cost of capital is essential not only for the company but also for
investors and future investors. If the results are as expected, everyone will be in the place
they want the stable company to be for investors happy to know that their money is
working and for future investors to make sure they are making the right decision. The
weighted average cost of capital (WACC) results from a combination of sources of funds,
including common stock, bonds, preferred stock, and any other long-term debt. The
WACC can have changed, and this is because it increases the beta and the rate of return
on equity. And this is because there is an increased risk as its value decreases. For
investors, the WACC result is significant because if it is lower than the return, the
investment is worthless, but the investors would be making the right decision if it is
higher.