Questions tagged [wacc]
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19
questions
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46 views
Rewriting WACC Formula
$WACC = \frac{E}{V} * R_e + \frac{D}{V} *R_D(1-T_c) $
where $R_D$ should be the cost of the debt. $T_c$ is the tax rate.
When googling the formula for cost of debt I find $Cost of debt = R_D = ...
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0answers
111 views
How to handle negative WACC due to net income of a company being negative?
I am calculating the weighted Average capital cost of a company using the following formula : WACC
However the company I am tying to find WACC has negative net income.
As a result my WACC is negative.
...
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0answers
47 views
WACC: should the new issue of debt be averaged?
If a company already has debt in the amount of 3M with the cost of debt of 10% before taxes and common shares in the amount of 4M with the cost of equity of 8% and then decides to raise more money ...
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2answers
39 views
Should the targeted rate of return stay the same regardless of the currency?
I work for a european company which invests mostly in the euro zone but also in the UK. I'm in charge with calculating the hurdle rate targeted for these investments.
The internal guidelines are for ...
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0answers
868 views
Negative Cost of Debt
I got the the interest expense from Microsoft, it is in negative: -2.73 billion (source: MSFT Annual Report). Does this mean Microsoft is receiving interest instead of paying it?
If my cost of debt ...
3
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3answers
2k views
Calculation for WACC for commercial banks
Commerical banks have a large weightage of debt from deposits, which has a very low interest rate. This caused our calculated WACC to be very low. Is this correct?
https://docs.google.com/...
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0answers
49 views
estimate cost of equity (Re) / required rate of return using DCF [closed]
I'd like to estimate Amazon's after-tax cost of equity (Re) using both the DCF and CAPM approaches. Tons of info and resources on how to estimate Re using CAPM, but DCF, I see no relevant resources. ...
4
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2answers
431 views
Why is there inconsistency in WACC vs unlevered return?
To evaluate an enterprise we can discount free cash flow by either the unlevered required rate of return or the WACC.
With Tax we have:
$WACC=R_e \frac{E}{E+D}+R_f\frac{D}{E+D}(1-t)$
where $R_e$ is ...
4
votes
3answers
231 views
Does WACC not depend on the cost of debt?
According to chapter 17 of Ross's Corporate Finance (Brazilian translation of 2nd edition),
$$
r_{WACC} = \frac{S}{S+B}r_S + \frac{B}{S+B}r_B(1 - T)
$$
and
$$
r_S = r_0 + \frac{B}{S}(1 - T)(r_0 - ...
0
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1answer
51 views
When calculating theoretical futuresprices for oil, how do you calculate the storage costs?
I have read that the terminal cost can typically be 0,15-0,5 dollars per barrel, but are you also supposed to include the cost of capital (WACC) when calculating the total cost? Why? Why not?
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1answer
5k views
What is the influence of inflation on the Wacc?
I understand that the WACC is influenced by the debt ratio but what is the impact of the inflation on the WACC
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1answer
187 views
DCF valuation and the constant WACC assumption
I have a question that has been on my mind ever since I learned about DCF. I was taught that for the DCF to be valid WACC should be constant. As a physicist by training this assumption is strange to ...
4
votes
2answers
287 views
Valuing equity of a firm using WACC gives incorrect results
Suppose I have a free cash flow to the firm FCFF and the market cap is E. Obviously I don't believe the equity valuation and that's why I would even attempt valuating it. So one way to do it is find ...
1
vote
1answer
75 views
Calculating a firm's cost of debt using bond issues
When a firm issues coupon bonds that are traded on the open market these bonds can trade at either a premium or discount during the lifetime of the bond. If, for instance, the bond trades at a ...
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2answers
812 views
Choosing WACC Tax Rate
I'm calculating the historical and forward quarterly WACC for a security. For the historical WACC, should I use the quarter's tax rate (which in some cases is very negative) or a TTM tax rate or ...
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0answers
58 views
Should cash-flows discounted at WACC be pre- or post-tax?
WACC in my mind is effectively a post-tax measure: $$\text{WACC} = \frac{E}{V} k_e+\frac{D}{V}k_d(1-t)$$ In this case should cash-flows, in particular loan cash-flows be adjusted for tax as well? ...
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2answers
292 views
Trying to calculate WACC (Weighted Average Cost of Capital) for this (small) data set
I've attached the data set I'm working with to this post. I'm trying to calculate the WACC using this data. I found a formula here:
http://www.investopedia.com/ask/answers/063014/what-formula-...
1
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1answer
423 views
How to use WACC for investment?
How to use a value of WACC? I have calculated WACC of company to be 7%. What if company had smaller or bigger WACC? Which one would attract investment?
4
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0answers
248 views
ISLAMIC FINANCE WACC
I need to calculate WACC for copany operating in the coutry with islamic finance system. I used build-up method to calculate cost of equity. But still searching for cost of debt in the economy. Has ...
