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Sir, for finding the combined earning after the acquisition/merger, why sometime answer show Profit after tax from each companies plus synergy but sometime answer show equity value of each firm plus synergy.
Is it acceptable both ways?
Dear Sir,
May I know how should I deal with a question of finding a WACC if the scenario provides more than one cost of debt (Kd)?
Thank you.
You calculate it in the same way as we always do.
You calculate the cost of each sources of finance in the normal way, and then we take the weighted average of them using the total MV of each source of finance.
It doesn’t matter how many sources of finance there are.
My lectures will help you (especially the Paper F9 lectures on the calculation of the WACC, because more than 2 sources of finance can happen in F9 as well).
(I assume you are not simply relying on the WACC formula on the formula sheet, given that that formula is rarely correct anyway)
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