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Dear John,
If the company’s capital structure changes and we need to calculate its new WACC, don’t we need to calculate its new cost of equity by deagearing its current beta equity using current capital structure and then regearing it using the new capital structure?
In the anwer there is no recalculation of the cost of equity for the new capital structure, simply weightings are chenged in the WACC calculation.
Please help.
I’m sorry, I have just noticed that there is a note to assume that the cost of equity and cost of debt do not alter. Otherwise we’ll have to do the above mentioned, yes?
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