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Present Values 3
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IntroductionLecture1.1
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SolutionsLecture1.2
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List Comprehension ReviewLecture1.3
-
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NPV vs. IRR 4
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IntroductionLecture2.1
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The Functions Part 1Lecture2.2
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The Functions Part 2Lecture2.3
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Testing NPV vs. IRRLecture2.4
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Other Profit Measures 4
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IntroductionLecture3.1
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Measures Part 1Lecture3.2
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Measures Part 2Lecture3.3
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Investment TimingLecture3.4
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Depreciation 4
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IntroductionLecture4.1
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The Basic ProblemLecture4.2
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Creating the Depreciation EquationLecture4.3
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The Tax ShieldLecture4.4
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Cash Flow Challenges 9
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IntroductionLecture5.1
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Total Cash FlowsLecture5.2
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Solution 1Lecture5.3
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Solution 2Lecture5.4
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Solution 3Lecture5.5
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Solution 4Lecture5.6
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Solution 5Lecture5.7
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Solution 6Lecture5.8
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Solution 7Lecture5.9
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Capital Asset Pricing Model 3
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IntroductionLecture6.1
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The EquationLecture6.2
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Graphing CAPMLecture6.3
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Risky Debt 3
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IntroductionLecture7.1
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Adjusting Debt for RiskLecture7.2
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SolutionLecture7.3
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Unlevering Equity 3
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IntroductionLecture8.1
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The r for EquityLecture8.2
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Including TaxesLecture8.3
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Weighted Average Cost of Capital 4
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IntroductionLecture9.1
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The EquationLecture9.2
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TaxesLecture9.3
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SolutionLecture9.4
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Debt Effect Analysis 2
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IntroductionLecture10.1
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The Effect of Debt on EquityLecture10.2
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WACC Challenge 2
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IntroductionLecture11.1
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SolutionLecture11.2
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Relative Valuation 4
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IntroductionLecture12.1
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Financial ConceptLecture12.2
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Solving Systems of EquationsLecture12.3
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ArbitrageLecture12.4
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Forward Contract Valuation 3
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IntroductionLecture13.1
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Forward Contract BasicsLecture13.2
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Forward ContractsLecture13.3
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Taxes
Once again, if we use taxes the equation becomes the below one:
Equation
a
= r
e
* E/(D+E) + r
d
* D/(D+E) * (1-T)
r
a
= Return on Assets
r
e
= Return on Equity
r
d
= Return on Debt
E = Equity Value
D = Debt Value
T = Tax Rate
Now that we have reviewed what the WACC equation is, let’s try a challenge.
Challenge
Here are the example inputs:
Stock Price = $20.0
Stocks Outstanding = 100
Present Value of Debt = $1000.0
Debt Yield = 5%
Expected Equity Return = 10%
Tax Rate = 30%
The reason that I put 20.0 instead of 20 is because python will otherwise define 20 as an integer, meaning it will not expect the need to use a decimal.