Questions tagged [wacc]

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4
votes
3answers
123 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 - ...
4
votes
0answers
218 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 ...
3
votes
3answers
860 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/...
3
votes
2answers
214 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 ...
2
votes
2answers
150 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 ...
1
vote
2answers
38 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 ...
1
vote
1answer
65 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 ...
1
vote
1answer
384 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?
1
vote
1answer
2k 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
1
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0answers
43 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. ...
1
vote
0answers
131 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 ...
1
vote
0answers
55 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? ...
0
votes
2answers
630 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 ...
0
votes
1answer
50 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?
0
votes
2answers
259 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-...
0
votes
0answers
45 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 ...
0
votes
1answer
410 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 ...