Hi everybody,
I am a bit confused with one concept and would like to confirm something with you:
I always thought that when we were computing the WACC of a project that a company wanted to do, we were using the WACC of the whole firm based on the capital structure of the firm and not the capital structure used to finance the specific project.
However after checking for few topics in the forum, I found different type of answers. Some says that we should use the capital structure of the project to re-lever the beta and then the capital structure of the company to compute the WACC. Some other says the opposite: to use the capital structure of the company to compute the beta and then the capital structure of the project to compute the WACC.
My initial understanding was to use the capital structure of the firm for both or ideally the targeted capital structure.
Could someone clarify this point with me? Thanks in advance for your help!