Do we use Target Debt to Equity or Market Values? Maybe I’m confused, but it seemed like in Corporate Finance we were using Market Values while during FCFF we are using Target. Also, in inflationary environments we use Target? Thanks in advance.
We use target when we have to find future FCFF and find the value of firm on the basis of future FCFF (corporate finance cash flow models). Otherwise we use its market.
I think it depends on if it is a forecast or not. If not, you would use the current values, but if you are forecasting as in the FCFF model, you use the target