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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.
Shareholders Shareholders are usually assumed to be interested in wealth maximisation. This though involves consideration of potential return and risk. Where a company is liste
What are agency problems? and between what two stakeholders do agency problem typically occur?
Financial Leverage In accounting and finance, the amount of long lasting debt that an organization has in relation to its equity the longer the ratio, the larger the lever
decision criteria of profitability index.
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