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Bank overdraft – wacc

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Bank overdraft – wacc

  • This topic has 3 replies, 2 voices, and was last updated 11 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • November 17, 2013 at 5:14 pm #146473
    Nizar
    Member
    • Topics: 49
    • Replies: 125
    • ☆☆

    why do we exclude overdraft in calculation of WACC?

    November 17, 2013 at 5:20 pm #146476
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54748
    • ☆☆☆☆☆

    We do not always exclude it.

    It depends whether it is intended to be long-term or short-term. For the WACC we are looking at the average cost of long-term capital.

    (Usually in the exam, the question will make it clear whether the overdraft is intended to be long-term or short-term. If is does not, then you will get full marks whether or not you include it, but state your assumption).

    November 17, 2013 at 5:39 pm #146481
    Nizar
    Member
    • Topics: 49
    • Replies: 125
    • ☆☆

    alright, thx

    November 17, 2013 at 5:40 pm #146483
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54748
    • ☆☆☆☆☆

    You are welcome 🙂

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