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Hi, I m wondering if you would be able to help me with a question re the WACC formula under M&M. On the formula sheet there are 2 WACC formulas.
I am confused why the WACC formula under M&M does not have the cost of debt anywhere in it? The formula above it has the cost of debt in it ‘Kd’. The WACC formula also uses Keu which is supposed to be the cost of equity in ungeared company. How can this formula give the WACC when it doesn’t have any weighting for debt and uses the ungeared cost of equity.
Thanks in advance for any help
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