This technical note compares two methods for the treatment of debt use in discounted cash flow valuation of investment projects or companies. The message indicates that the weighted average cost of capital approach (WACC) and the equity approach, residual current circuit breaker (ER) equivalent results when consistent assumptions are used. General characteristics are presented with concrete examples, including a LOTUS spreadsheet.

This technical note compares two methods for the treatment of debt use in discounted cash flow valuation of investment projects or companies. The message indicates that the weighted average cost of capital approach (WACC) and the equity approach, residual current circuit breaker (ER) equivalent results when consistent assumptions are used. General characteristics are presented with concrete examples, including a LOTUS spreadsheet.
«Hide

from
Robert S. Harris
10 pages.
Publication Date: Aug 26, 1992. Prod #: UV2312-PDF-ENG
Valuation Methodology: A comparison of the weighted average cost of capital and equity-fault current approaches HBR case solution

[related_post themes="flat"]