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WACC for Residual Income & EVA

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA APM Exams › WACC for Residual Income & EVA

  • This topic has 2 replies, 2 voices, and was last updated 11 years ago by elsie2009.
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    Posts
  • October 13, 2014 at 7:27 am #204284
    elsie2009
    Member
    • Topics: 34
    • Replies: 61
    • ☆☆

    Good Morning

    Can I check my understanding of Wacc if initial calculations using the book values of debt & equity.

    The book value of debt is $1,500 and book value of equity as total assets less total liabilities – $15,400. Equity Cost of capital is 15% and Interest 10%.

    If I use these figures I get a WACC of 14.29%

    Kd (1-T) * Vd (0.07 * 8.9) = 0.623
    Ke * Ve (0.15 * 91.1) = 13.665

    I also get the same when I use the F9 WACC formulae from your notes, is this the correct method?

    Much appreciated.

    October 13, 2014 at 7:48 am #204285
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10648
    • ☆☆☆☆☆

    That is the correct way to calculate WACC.

    October 13, 2014 at 10:02 am #204292
    elsie2009
    Member
    • Topics: 34
    • Replies: 61
    • ☆☆

    Gromit you are wonderful, thank you for your time 🙂

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