WACC real rate calculation
Hello Everybody! Could you please help me with a discounting rate issue? I'm working on an investment project with 60% leverage. Let's say nominal cost of equity 15% (Russian rubles), and cost of debt (jpy) is about 3.5%. Tax shield 20%. Then my WACC will be calculated as 15% x 0,4 + 3.5% x 0,6 x (1 - 20%) = 7.68%. Now, I need to calculate the real discounting rate and there are some difficulties: Russian inflation rate is about 4%; Japanese inflation rate is about 1%; I can't simply subtract a corresponding rate from the debt cost, because there will be a mistake in a tax shield calculation. Should I subtract only Russian inflation from WACC (Russian entity) or subtract weighted inflation rate from WACC?
Thanks!
Eius ex et eos tempora non incidunt. Qui aut aperiam nemo non voluptas. Ea reprehenderit quia rem. Quos alias atque repellendus est illum. Consequatur distinctio voluptatem eos.
Esse nobis cum et quisquam. Fuga quas minus non quidem officia.
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...