WACC Calculation
Hi,
I was assigned to calculate the WACC for a valuation model and was thinking of using Damodaran database but i saw that he uses "Total Equity Risk Premium" already including the "Country Risk Premium" [ERPs by country Tab, column E]. At the same time there is a formula written in my model template "Cost of Equity = Rf + β*(ERP) + CRP + Size Premium".
So should i strip out the CRP from Damodaran database or strip it out from the formula since is already included in Damodaran's Total ERP
If the country risk premium is already included in the ERP, then you don't need another adjustment on the cost of equity side. However, with respect to the cost of debt, be sure to also include Damodaran's ratings based default spread (RBDS).
Usually for Kd they use the 1y average of the country 10y government bond. You are suggesting is the wrong approach if a take Damodaran's ERP?
WACC calculations are the biggest Fugazi in Corporate Finance bro world. What a pointless task you have been set
Just pick a round number and be done with it. 8% 9% 10% or whatever
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