Hopefully you guys can help me. I am trying to value a company that issued debt at two different interest rates at the same time (ex: issued a 2 yr note today @ 8% and a 5 yr bond today @ 6%). Do I have to calculate a different WACC for each year in the DCF based on the amount of debt outstanding ((D/(D+E)) and the new cost of equity with a different levered beta? And then multiply year 2's WACC by year 1's instead of just squaring the year 1 WACC for the WACC for year 2...
Hopefully that wasn't too confusing.
Thanks for your help
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You should only use one WACC
You should only use one WACC for all the years' cash flows. If you want to vary debt levels for different years, use the APV method. On the question of the 2 debt rates, I'm not too sure what you're asking but in any case take the weighted average cost of debt as the debt rate input for the WACC.