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Hi Sir
Hope you are fine
Can you please explain to me when do we have to assume kd is zero?
How do we identify this in the question?
Though in the above mentionned question we have kd but in the answer it is not included when we calculate ba or wacc.
Thanks
We certainly do not assume that the cost of debt is zero!! It is given in the question as being 4.5% and this is what has been used in the answer.
What you may be confusing it with is the when we use the asset beta formula, we always assume that the beta of debt is zero. I do explain this in my free lectures on CAPM.
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