Explain about changing debt, Financial Management

Assignment Help:

Is it possible to use a constant WACC in the valuation of a company with a changing debt?

Theoretically, the WACC can only be constant if a constant debt is expected. If the debt changes from one year to the next, the WACC changes as well. In order to value companies in which debt changes dramatically, the APV (Adjusted Present Value) is simpler and more intuitive. It is possible to use a constant WACC (the weighted average of the WACC of the dissimilar years) when debt changes, but it is a number that does not have anything to do with the WACC in a certain year.

 


Related Discussions:- Explain about changing debt

Determine the motivation foreign firm - high - tech u.s firm, Currently, ma...

Currently, many foreign firms from both developed and developing countries obtained high-tech U.S. firms. What might have motivated these firms to obtain U.S. firms? Answer: Se

Explain some examples under fasb 52, Explain some Examples under FASB 52 th...

Explain some Examples under FASB 52 that a foreign entity's functional currency would be similar as the parent firm's currency. Answer:  Three instances under FASB 52, in which

Average of relatives method, Average of Relatives Method We have seen ...

Average of Relatives Method We have seen the construction of an index number using the aggregates method. In this section, we shall see the construction of an index using the

Company default rate on account receivable when its too low, Can a company ...

Can a company have a default rate on its accounts receivable that is too low?  Explain. A company might have a default rate on AR that would be considered too low if by liberal

Capital budegting, SCL Limited a highly profitable company is engaged in th...

SCL Limited a highly profitable company is engaged in the manufacture of power intensive products.

Rationale for corporate governance, Rationale for corporate governance ...

Rationale for corporate governance The organization of the world economy (particularly in present years) has seen corporate governance gain prominence mostly since: Insti

Factors affecting cost of capital, Factors Affecting cost of capital are el...

Factors Affecting cost of capital are elements in the business environment that cause a company cost of capital to be high and low. Figure below illustrative the various primary fa

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd