This was a while ago, but I'm not convinced by the interviewer's answer. He asked me "during the crisis, did the overall wacc of most industries go up or down?" I said it went up because of the risk premium went up, causing the cost of equity and cost of debt to go up.
He said I was wrong, because the risk free interest rate went down more than the increase in risk premium. I still don't quite get it..
How is that possible when the credit/TED spreads so damn high at that time? I think I got dinged because of this question.
Can anyone elaborate?