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Question 1 had an EVA calculation and the debt:equity ratio was 100%. The examiner says many people got this wrong. Dos this mean ratio of 1:1?
Yes.
If debt were 400k and equity 1000k, the D/E ratio would be 0.4 or 40%
So, 100% means 1:1
But why examiner answer is calculate based (1/2 × 16%) Im abit confuse for this Q1 EVA adjustment as well.. stated that Debt/Equity is 100%, so in the calculation on WACC isnt it should be =(1 × 16%) , why is (1/2 × 16%) ?????? Anyone could help? Would appreciated alot if someone could help.. thks
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