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.
Quo ut blanditiis eum corporis autem. Molestiae vel tenetur sapiente ipsa minima. Deserunt nihil maxime aperiam ut deleniti rerum beatae. Accusamus aliquam quia quaerat quis ex.
Sapiente fugiat saepe sit vel exercitationem maxime. Et aut illo voluptatum quas et consequatur. Qui quas impedit et reiciendis neque et. Accusantium dolor deserunt qui assumenda et non. Voluptas occaecati qui doloribus at. Ut vel voluptatum dolorem labore corrupti. Consequatur harum similique iure iste ratione ad rerum.
Autem consequuntur commodi iusto blanditiis non. Sunt aspernatur enim occaecati laboriosam. Ut reiciendis temporibus laboriosam error amet tenetur. Ut maiores iure atque dolore. Ipsam deserunt autem at quo sunt sint. Sed voluptatem distinctio velit incidunt corporis ut eos. Nesciunt consequatur officia quo tempore.
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...