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WACC is the weighted average cost of capital therefore from the business's standpoint, they would want to have a lower WACC because it is an average of the % cost of capital. From an investor's standpoint: it can be mixed. For a bondholder, they would want WACC to be a bit high but not by too much. For example, a higher WACC may mean the company is paying a ...


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I'm no expert of WACC or company finance, etc. But from a pure bond pricing/trading perspective, bond price embodies at least two risks: interest rate credit (i.e., the company defaults) If a bond price moves, it could either because of interest rate, or because of credit(i.e., the market views the bond as less or more risky). Following the assumption ...


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The various forms of the Capital Asset Pricing Model, as well as Black-Scholes, are built on top of the axioms of Frequentist Decision Theory. An assumption in the model is that the parameters are known with a probability of one. Generally speaking, this assumption is harmless. There are many models where the result with perfect knowledge is also the ...


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It depends what you meant by “bank”. For example in the case of Bank of America, the deposit taking entity is Bank of America NA (BANA) which is a wholly owned subsidiary of Bank of America Corp (BAC). The latter does not take deposits , but it issues most of the unsecured debt and it is the issuer of the listed equity of the company. Hence the WACC of BAC ...


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The theoretical futures cost would be spot price plus funding cost, i.e. WACC (that of the average market participant, not yours), plus the cost of storage, plus the cost of taking the oil out of storage and bringing it to the point of delivery, minus any economic benefits that accrue from holding a long position of the commodity


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The WACC (weighted average cost of capital) formula is a weighted average of the cost of equity and the cost of debt weighted by their respective size (see investopedia definition here). As such, it does not include the inflation rate directly. Inflation should increase the nominal rate of return that investors require to make an investment, especially on ...


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If it helps, this class of problems has a non-existence proof tied to them. Mean-variance finance models have an assumption that all parameters are known built into the proofs. There is an existing proof that shows these models, if true, can never form an estimator for the parameters. Consider the intertemporal budget constraint from the CAPM. It is ...


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If you are trying to determine the quarterly WACC your tax rate needs to be quarterly as well. Personally, I would take a look at the change in income tax expense. You can also try experimenting with change in (income tax expense / ebit) or adding in income tax expense + deferred tax liability. However, I would say use the quarterly tax rate even if it is ...


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As you can see, the tax rates are listed (from L - R) as 31.0%, 38.5%, 38.5%, and 38.5%, and because your valuations should be forward looking, you should use what is expected, meaning the 38.5% tax rate. Does that make sense?


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