As titled, I am having issue understanding and using those two equations, I dont see them on the notes and the EOC pactices on reading 24 relied heavily on them. How should I comprehend those? It seems the EOC use these two equations to derive implied Rwacc or R0 and insert those for other calculations, can someone walk me through where these come from?
I must admit I am also fuming in anger to see this in CFA curriculum; the sheer amount of theory and assumptions should easily render it useless for any professional use. In 1985 an Economics Nobel Prize was simply wasted. Pardon for the strong language.
Getting back to the equations, here is a small improvement.
VL=value leveraged= EBIT (1-t)/WACC
VU=value unleveraged= EBT (1-t)/WACC (this is WACC with zero debt, i.e. it is simply the cost of equity).