Questions on DCF
I have been learning more and more about DCF's and other valuation models lately and have two questions that I can't find answers for.
Why is weighted average cost of capital used and not marginal cost of capital? Wouldn't marginal cost of capital be more representative of the actual cost?
Are capital expenditures ever broken out into maintenance capex and growth capex? This would leave maintenance capex to still be subtracted out of fcf, but growth capex would stay in fcf because the company could choose to use it to repay debt/declare dividends.
I would appreciate your thoughts on the above.
are you valuing the marginal value of a company with dcf? no. so you use wacc
if the company can grow it will spend the money on growth (they will get debt if they don't have money) rather than repaying debt/pay dividend, this of course is based on the assumption that the growth capex will cause growth, but that is what people usually assumes when they do forecasts.
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