$WACC

[hw0799]

when calculate $WACC, why use (long term debt+equity)*WACC? what long term deb+ equity stand for? Thanks.

 

[wangta01]

It stands for capital. Think of it this way - what does WACC measure? Capital, which is debt and equity. So you multiply WACC * Total Capital.

 

[hw0799]

is (long term debt(t-1)+equity(t-1)) also represent book value at time (t-1)? Thanks.
hw0799 Wrote:
——————————————————-
> when calculate $WACC, why use (long term
> debt+equity)*WACC? what long term deb+ equity
> stand for? Thanks.

 

[rellison]

Remember that invested capital is defined two ways:
1) the BV of long term debt + BV of equity
or
2) fixed capital + net working capital
This is why the Market Value Added formula is (fair value of long-term debt + fair value of equity) minus invested capital: you’re finding the amount of market value over the book value (the “spread” if you will) you have gained over the BV(longterm debt)+BV(equity).

 

[tickersu]

Why are you digging up all of these old threads? This is six years gone.

 

[defacto]

Pretty desperate indeed