I've been confused lately by the way experts interpret the way Enterprise Value changes when Debt-to-Equity ratio changes.
Some of them say that since D/E changes, tax shields are expected, sois going up.
But if you think of it this way:
D/E going up drives Beta(levered) to go up. Higher Beta leads to higher cost of equity, which also makes higher. Since WACC is becoming higher, EV goes down.
This may be a simple question for some of you guys out there, can you please shed some light on it?
And a small follow-up:
Do we calculate WACC using D/E or D/V (where V = Enterprise Value, i.e. D+E), because I've seen both versions?