Ishaan - Yes the friend is equally liable if the house could not be sold for a profit. We consider it as a cost in the WACC because, the friend is not giving you the money free of cost - he is expecting returns on that money. Whatever returns he is expecting is the cost of that money. even if it were your own money it would have a cost, since you would be expecting some returns on it.
Oct 15 2012 12:48 AM
WACC basically gives you an idea about what returns you will have to give your investors who are funding any project.
Hope that is clear.