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Hello there. I would like to ask for the right way to calculate the MV of equity and debt (to calculate WACC).
I have studied the whole F9 syllabus for the Dec 2013 exam and am really thankful for the OT lecturers/ members. The thing is that the only thing that is frustrating is calculating the MV. How do I calculate both MVs if the question includes financial statements? Also what if financial statements are not given in the question? I know that it was explained in the course notes/ lectures but to be honest, I’m kind of a slow learner 😛Thanks in advance 🙂
Putting it simple Market value is calculated as the present value of all actual future cash flows from a debt/equity discounted using Kd/ Ke(Current market rate).
whether FS is included in the question or not u need to determine the future cashflows and then discount them.. remember for equity future cashflows are dividends and to determine the present value of all future dividends we normally use dividend valuation model(if future dividends are constant) or dividend growth model(if future dividends are growing at a constant rate).
Sorry but I still dont really get it =/
I would be thankful if you explained it to me using a simple numerical exampleHi @Ali
It’s really good if you have only one thing that is frustrating 🙂Can you please give an example of question, when there are given FSs and it is needed to calculate MV?
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