Day 2

Walk through a simple WACC calculation using a fictional cost of equity and debt.
Explain in your own words the APV formula and how it separates operations from financial benefits.
When would APV be preferred over WACC?
If tax rate increases, how does that affect WACC? Why?
Does WACC or APV show you how much of value comes from financing?

WACC is the rate at which a company’s future cash flows need to be discounted to arrive at a present value (PV) for the business.

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