- This topic has 3 replies, 2 voices, and was last updated 9 years ago by
.
Viewing 4 posts - 1 through 4 (of 4 total)
- Posts
Sir for investment appraisal we do not use wacc if level of gearing changes and business risk change,then what do use use at that time. Thanks
If the business risk changes and that change in gearing is small, then you calculate the new asset beta, then the new equity beta, and then the new cost of equity (and then the WACC, using the existing gearing ratio).
If there are big changes in the gearing we take the APV approach (and almost always the question will tell you if they want you to take an APV approach).
Viewing 4 posts - 1 through 4 (of 4 total)
- You must be logged in to reply to this topic.