In which cases use different WACCs
Is this possible to use different WACCs within order to discount each year’s flows? In which cases?
Expert
Yes, this is possible. The WACC can only be constant while a constant debt is expected. When debt changes from one year to the next, therefore the WACC also changes from one year to the next, as per to the formula:
WACCt = [Et-1 Ket + Dt-1 Kdt (1–T)] / [Et-1 + Dt-1]
Ke is the required return to equity, Kd is the cost of debt and T is the effective rate of income tax. Et-1 and Dt-1 are the values of the shares and the debt that are acquired in the valuation. Such formula for WACC means that the value of the debt coincides along with its book value.
Who demonstrated that how to match theoretical and market prices for normal bonds?
Who explained put–call parity?
How can auditor spot acts of creative accounting? Means let an illustration, the excess of provisions or the non-elimination of intra group transactions along with value added.
XYZ Company has debt/assets ratio 50%, that is too high and it must be at 45% to be optimal. This debt reduction must also reduce the bankruptcy costs by $30 million. At present, XYZ has 5 million shares of common stock selling at $50 each. The tax rate of XYZ is 30%.
Your Corp, Inc.'s data is as follows:Beta; 1.30Recent dividend; $.90Expected dividend growth; 7%Expected return of the market; 14%Treasury Bills are yielding; 4%Most recent stock price; $65 A] Us
Benefits of Cash to cash analysis: The benefits of Cash to cash analysis are as following: 1. Helps in better cash management situation thus, increasing liquidity. 2. The cash a
Berks Corporation is expecting to have EBIT next year of $12 million, with a standard deviation of $6 million. Berks have $30 million in bonds with coupon of 10%, selling at par, which are being retired at the rate of $2 million annually. Berks also have 100,000 share
State the term Convertible Bonds in Corporate Bonds?
Atlanta Company stock is predicted to follow an exponential growth rate. The relationship among the current stock price P0, future price PT after time T, and continuously compounded rate of the return r, is: PT = P0eγT. The stock doesn’t pay any
Could we suppose that, as we cannot predict the future evolution of the value of shares, a good estimation would be to consider this constant during the next five years?
18,76,764
1942855 Asked
3,689
Active Tutors
1455531
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!