Question:

What happens to WACC as you increase leverage?

Answer hidden.

Answer:

The more leverage you put on initially will bring WACC down, until you cross the point of optimal capital structure when it will start to increase WACC because interests rates will be higher and the company’s beta will be higher because the amount of debt makes it riskier.

Question:

What happens to WACC as you increase leverage?

Answer:

Other

DCF

What is beta?

What is a potential issue with basing terminal multiples on current public company multiples?

Would you expect the WACC to be higher for a $1 billion or $100 million market cap company?

How do you determine the discount rate in a DCF?

How do you calculate WACC for a private company?

Walk me through a DCF

What is the mid-year convention and why would you use it in a DCF?

Walk me through how to get from Revenue to Unlevered Free Cash Flow in your DCF projections

Why do you usually project out 5-10 years in a DCF?

How do you calculate beta?

How do you select the appropriate exit multiple when calculating terminal value?

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How do you calculate terminal value?

What are the formulas for un-levering and levering Beta?

Would you expect the cost of equity to be higher for a $1 billion or $100 million market cap company?

How do you calculate cost of equity?

What happens if you use Levered Free Cash Flow instead of Unlevered Free Cash Flow in your DCF?

Which company would we expect to have a higher beta, an industrials company or an internet company?

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