How should I best determine the equity weighting (E/E+D) for a private company's WACC calculation? This isn't a startup but a 10 year old private company, that has a capital structure which is unlikely to change. Is it best practice to use the book value of equity shown in the balance sheet. Or should I determine the median E/D+E weighting from listed comps, albeit this private company has a different cap structure? Or is there another, better, option? Thank you
Trending Content - Investment Banking Forum
| +231 | Coverage Banking is Paradise | 29 | 6d |
| +119 | UBS preparing for a October Layoff Massacre | 98 | 2m |
| +116 | London Recruiting is Paradise | 46 | 2h |
| +77 | My Motivation Is At An All Time High | 13 | 3d |
| +56 | Work and Suicide | 23 | 3h |
| +49 | Is 7 years in banking enough to retire, or am I delusional? | 27 | 1h |
| +43 | Do actual investment bankers despise IB TikTokers as much as I think they do? | 26 | 22m |
| +33 | MM IB --> NYC IB? | 17 | 22h |
| +27 | Should I escape the matrix | 5 | 6h |
| +24 | Negotiating VP Sign-On Bonus (NOT Tied to Deferred Comp)? | 22 | 12h |
Career Resources
I would go with using comps to get EV
You start with using an market average gearing to get to a valuation. From there you indeed plug the real equity value (based on target leverage - could well be lower than market average because of owner's preferences) into the formula with which you create a circular reference that you let excel solve a few times.
Highly debated topic however, probably many opinions on this. But everybody will agree you should never use book value.
Thank you very much
Voluptatem voluptatibus qui iure voluptatum et odio. Libero perferendis quia aut id. Est sit ipsum laborum ut minus non consequuntur.
Dolores dicta rem et. Minus soluta soluta facilis dicta est nam. Aut illum incidunt aut quia.
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...