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WACC formula

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › WACC formula

  • This topic has 1 reply, 2 voices, and was last updated 5 years ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • June 7, 2020 at 8:16 am #573022
    trainee1
    Participant
    • Topics: 57
    • Replies: 30
    • ☆☆

    Hello Mr Moffat.
    Thank you very much for your great lectures.

    Sorry to take your time sir, I am confused about the WACC formula.
    There are TWO formulas for WACC.

    Formula 1: WACC = Ve * Ke /(Ve+Vd) + Vd * Kd(1-t) /(Ve+Vd)

    Formula 2: WACC = Veu(1 – Vdt/(Ve+Vd))

    I am confused when I should use them. So far I though they both would lead to the same WACC, but it seems they are not the same. I mean there was a question which use the second formula to calculate the WACC, but when I tried to calculate the WACC with the first one the answer was not the same 🙁

    Thanks

    June 7, 2020 at 10:25 am #573032
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    The second formula you have typed is not a formula for the WACC. If the question you are referring to is either a part exam question or a question in the BPP Revision Kit, then tell me which question and I will explain what they have done.

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