1. Weighing in on WACC.
- Author
-
Adhikari, Mike
- Subjects
- *
ARITHMETIC mean , *EQUITY (Law) , *CAPITAL , *BUSINESS valuation , *DEBT-to-equity ratio , *DISCOUNTED cash flow , *COST - Abstract
The article demonstrates how using weighted average cost of capital in the capitalization formula can overstate the value of equity, at least as leverage is decreasing. It says that the capitalization formula with weighted average cost of capital (WACC) is universally used in business valuation because it is quick and convenient.
- Published
- 2004