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AFMThe calculation of WACC

Ooanhlth14y ago
Hi,
I am quite confusing about the calculation of WACC in assessing NPV for new investment project.

We knew that WACC= we*ke + wd*kd(1-t)

But should we include new debt & equity raised for this project and recalculate the Wd and We, or just use the current Debt and equity to calculate them?
Pls help, thanks
John MoffatJohn MoffatTutor14y ago#1
To be honest, it depends on the question.

Usually we use the current debt and equity. However if the gearing ratio is changing the we use the new WACC.

The question usually makes it clear. If it does not then state your assumptions - you will still get most of the marks even if your WACC is different from that in the answer.
Former userFormer user14y ago#2
Hi
suppose we are to estimate the cost of equity of unlisted entity, and its comparable entity is listed.. should we ungeared the equity beta of the listed company by book values? as subjected entity is not listed...
In my views, it must be ungeared by market values..
waiting for response...!
Ooanhlth14y ago#3
Thanks a lot John Moffat!
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