The Cost of Capital - Using the WACC to Value a Project
3 important questions on The Cost of Capital - Using the WACC to Value a Project
What is the levered value of a project?
The value including the benefit of the interest tax deduction
What activity is referred to as the WACC-method?
Discounting future incremental free cash flows using the firm's WACC
What three steps does one follow when applying the WACC-method?
1 Determine the incremental free cash flow of the investment
2 Compute the weighted average cost of capital
3 Compute the value of the investment, including tax benefit of leverage by using the WACC
2 Compute the weighted average cost of capital
3 Compute the value of the investment, including tax benefit of leverage by using the WACC
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