I need a help on find WACC on impairment project.
I am a employee of listed parent company assign to calculate “value in use” of their 2 subsidiary.
So, i using discount cash flow model and discount with WACC. The thing is one of thier subsidiary have negative book value equity ( i get that WACC should use market value but this 2 subsidiary was private company that hold by parent 100% not for sale)
Question 1
Should i go with 100% weight of debt and 0% weight of equity or i need to use capital sturcture of similar company in line with industry.
Question 2
If i decide to go with capital sturcture of similar company in line with industry, how can i define cost of equity. Right now, the idea was using CAPM + Pure play method for beta.
If i use pure play method on estimate beta of private company, can i use their parent company that listed to be benchmark or i need to using industry beta. Because its operate in the same nature of business.
Feel free to comment your opinion and thank in advance