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Hello Mr Moffat,
I have a 3 questions:I am looking at a friend’s notes who wrote F9 before and trying to understand the information scribbled……is there a rule of some sort when calculating the WACC in a situation when 1-the market value = nominal value as opposed to 2-when they are not equal?
Also, I am seeing something scribbled here saying if MV=NV, then use Coupon rate= Kdbt/yield, yield deals with redeemable debt.
What exactly does the yield refer to?
The WACC is always calculated using market values – there is no other rule.
Yield is the return to the investor (so the IRR of the pre-tax flows). That equation you have written makes no sense.
Our notes and lectures contain all you can be asked regarding calculation of WACC.
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