when calculate $WACC, why use (long term debt+equity)*WACC? what long term deb+ equity stand for? Thanks.
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.
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.
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).
Why are you digging up all of these old threads? This is six years gone.
Pretty desperate indeed