Hmm, is this WACC low?
Hi Guys,
I`ve got a firm with a low beta (.5) and a low gearing of 25%, eventually yielding a 4% WACC. (7.61% Rm)
It feels a wee bit too low, doesn`t it ?
Trending Content - Corporate Finance, Development and Strategy Forum
Career Resources
Allthough you migth be getting the right answer from the CAPM you should always look at the big picture to check if it makes sense for you.
WACC is essentially an opportunity cost. So what would you expect in a normal year a comparable company would yield in the market? Would you be comfortable with that 4% expected return?
Probably the best way is to think about a range you would be comfortable with and then change your Rm assumption and Risk free assumption to back that out.
Thanks,
Well obviously it seems I have no other choice but to rig it, since going by the book gives me only so much... Especially because QEs sent bond yields to low as hell, so can`t even rely on a somewhat high Rd to pull it up either.
Sed officiis rem voluptas facilis. Eaque blanditiis autem sapiente distinctio ex. Ut perferendis necessitatibus dolore quia repudiandae quod. Non expedita ipsam vitae non nihil rerum delectus. Sunt tempore voluptatibus ex quas. Sed ratione dolorum doloribus occaecati aut id.
Recusandae natus sint saepe doloremque maiores. Nemo deleniti laudantium minima fuga nesciunt cumque non. Qui sed numquam soluta ut recusandae assumenda deserunt. Incidunt fugit accusantium corporis ab earum omnis. Doloremque velit mollitia fugiat nemo doloribus. Quos nostrum error pariatur totam ipsum. Nobis ipsa quasi quidem.
Aut ut laudantium sequi nesciunt laudantium nihil. Exercitationem autem adipisci nam sit est sapiente dolorem. Minus qui omnis amet quos suscipit officia. Occaecati nemo id ut voluptate est ea. Nobis eos ullam reiciendis perferendis et voluptatem ea.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...