debt/equity ratio

CFA Level II
#1

do we only use the formula debt/equity ratio/1+debt/equity ratio to find the percentage of debt for use in the WACC calc? Me most confused??

#2

Hey jar jar binks, let me help you. For WACC you need capital structure WEIGHTINGS, IE D/D+E is the weight. D/E is the debt/equity ratio which may be a solvency test, and one of the most likely uses will be to unlever/relever beta.

#3

I think you would actually use V/E (or 1+D/E) to relever…if you are using the shortcut formula.

#4

you could also use it to determine net borrowings in FFCE questions.