wacc breakdown (net debt usage/ average debt)
Dear users,
Please help me to understand wacc calculation.
I do my master programme and teacher of Corporate Finance course requires us to calculate wacc using average net debt. Could you help me understand the logic?
I have checked:
-berk, demarzo
-damodaran
-brealey myers
And i haven't manage to find an answer there. They just mention we could use net debt if a firm has lots of cash, but that's all.
In cases when net debt is negative we have to consider it as a zero. However, a firm uses debt and gets tax shield advantage, so logic in unclear for me.
And what about using average? As far as i know, past data are irrelevant for valuation purposes. What's the logic of using average? At the moment of valuation we have concrete amount of debt, why do we should* pay attention to the past then?
Thanks in advance!
* from our teacher perspective
ps: it's top business-school in my country so i guess there should be logic somewhere
pss: next session in 2 weeks, i will definitely ask him, but it interests me right now :)
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