Formulae Flashcards by Hugo Salmon

Q

McKinsey Valuation Formula

A

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Q

Cost of equity

A

ke = ku+(ku-kd)D/E

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Q

WACC if interest tax not deductible

What is added if it is deductible?

A

WACC = ke(E/(D+E)) + kd(D/(D+E))

If it is deductible multiply second term by (1-t)

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