To discuss: The preference on using book values for debt and equity while calculating the weighted average cost of capital (WACC).
Introduction:
The weighted average cost of capital (WACC) refers to the weighted average of the cost of debt after taxes and the
Where,
“WACC” refers to the weighted average cost of capital
“RE” refers to the
“RD” refers to the return on debt
“E” refers to the market value of equity capital
“D” refers to the market value of debt
“V” refers to the market value of total capital
“TC” refers to the corporate tax rate
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Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
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