Hello,
If we are given "the cost of capital" and asked to calculate EVA, there so no need to calculate WACC, right?
But if there are 1) cost of equity and 2) cost of debt, then wee are supposed to calculate WACC?
I am alittle bit confused. Did I get it right above?
Thanks!
Ask the Tutor ACCA APM
Cost of capital --> EVA
Because:-
Cost of Capital is WACC-----------WACC is abbreviation of "Weighted Avg Cost of Capital"
Cost of Capital includes both 1) cost of equity and 2) cost of debt
So to calculate Cost of Capital (WACC) you will use 1) cost of equity and 2) cost of debt; in the WACC formula.
I know its prohibited to answer in Ask th Tutor section but, I have replied because exam is so near
11y ago#2if you are given WACC, there is no need to calculate it.
Often you are given Ke and Kd and you then have to calculate the WACC for EVA (remember Kd should be post tax).
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