- This topic has 1 reply, 2 voices, and was last updated 5 years ago by
.
Viewing 2 posts - 1 through 2 (of 2 total)
- Posts
sir before acquisition when we have to find out the MV of equity of the target firm for a potential acquisition, we use the target’s own WACC or Acquirer’s WACC(or ke for that matter)? Whose cost of capital or ke do we use is my main question?
It depends on exactly what the question is asking for and the information given.
However if you are meaning the MV of the equity in the target firm before the acquisition (which is normally given in exam questions) then you would normally discount the free cash flows to equity of the target firm at the target firms shareholders required rate of return (which could likely mean using the dividend valuation formula).
However, again it all depends on what is wanted and the information available.
Viewing 2 posts - 1 through 2 (of 2 total)
- You must be logged in to reply to this topic.