--%>
Assignment Help - homework help

Is it possible to use a constant WACC in valuation

Is this possible to use a constant WACC in the valuation of a company along with a changing debt?

E

Expert

Verified

The WACC can only be constant theoretically; if a constant debt is expected. If the debt changes from one year to the subsequent, the WACC changes too. In turn to value companies wherein debt changes dramatically, the Adjusted Present Value (AVP) is easier and more intuitive.

This is possible to use a constant WACC that is the weighted average of the WACC of the different years while debt changes, but this is a number that does not contain anything to do with the WACC in an exact year.

   Related Questions in Corporate Finance

  • Q : Could we explain that goodwill is equal

    Could we explain that goodwill is equal to brand value?

    		•
  • Q : Problem on rules of the International

    RainFlower Trading Limited is a wholesaler of electronic calculators in Hong Kong. It has been importing goods from a Philippine manufacturer for eight years. The Philippine manufacturer had accepted payments in advance in the past. Recently, because of political turm

    		•
  • Q : Which parameter good measures value

    Which parameter good measures value creation; the Economic Value Added (EVA), the CVA (Cash Value Added) or the economic profit?

    		•
  • Q : Assessing market expectations using CAPM

    Assume that the risk-free rate is 1% and the expected market return is 9%. You are considering purchasing Super Soft stock, which currently sells for $100 a share and will pay its next (annual) dividend of $1.00 exactly one year from today. Super Soft is considered to

    		•
  • Q : Continuously compounded rate of return

    Solve for the stated annual rate, r equal to the continuously compounded rate of return implicit in turning $1 at the end of 1925 (beginning of 1926) into these reported valued from RWJ9 in 2008 Figure below: 1. Determine the state

    		•
  • Q : What is Box Spread Box Spread: This is

    Box Spread: This is another strategy which seeks to exploit the arbitrage opportunities which are available in the market. In case that the options are correctly priced, this strategy would earn only the risk free rate. However, due to existence of im

    		•
  • Q : Who introduced put–call parity Who

    Who introduced put–call parity?

    		•
  • Q : Who explained the high-peak/fat-tails

    Who explained the high-peak/fat-tails?

    		•
  • Q : How much confidence can an investor

    I heard conversation of the Earnings Yield Gap ratio, that is the difference among the inverse of the PER and the TIR on 10-year-bonds. This is said that if this ratio is positive then this is more advantageous to invest in equity. How much confidence can an investor

    		•
  • Q : Who were the creators of uncertain

    Who were the creators of uncertain volatility model?

    		•