Schweser Page 159, Equities Book, LOS 34.j; Free cash flow valuations
In an example they’ve used the debt:asset ratio instead of the target debt:equity ratio to calculate WACC, whcih is later used in valuing the firm using FCFF model
In the end it explicitly states:
“Notice that the actual debt-to-equity ratio does not equal the target ratio. There is nothing inconsistent in this example. WACC usually calculated using target capital weights”.
Can anybody explain this? Makes no sense to me