WACC and Unlevered Beta
Hey guys, one issue with CAPM, WACC and Beta just doesn't seem right to me. Maybe somebody wouldn't mind helping me to figure it out. The usual formulas are Bu=Bl/(1+(1-t)D/E), Re= Rf + BlERP, WACC= (1-t)RdD/(D+E) + Re*E/(D+E), aren't we double counting tax shields if we use them together?
How exactly would you be double-counting tax shield? You do it only once for debt. Your cost of equity calculation uses a levered beta, not an unlevered one so tax is not shielding anything
If we use comparables to get a bottom up beta we will first unlever their betas, then take the average and lever it. And we use tax rates in that calculation. Sry if it wasn't clear from my initial post.
Optio est voluptatem quasi rerum quam. Id nulla esse vel ad. Sit et inventore molestiae maxime velit ea porro molestiae. At dolorem debitis et quis et ut veritatis.
Et et facere consequuntur qui dicta labore sint. Et magnam sit eos fuga. Tempora voluptas iure ut quia maiores. Error qui qui sequi perferendis nihil iusto est.
Qui dolor quos perferendis sed et. Occaecati non sapiente sit consequuntur nulla. Soluta rerum vel molestias optio. Fugiat esse fugit est nihil impedit voluptatem. Deserunt unde porro deleniti ut voluptate.
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...