Demonstrate optimal WACC given increasing costs associated with greater leverage.
- [Narrator] The ultimate question companies care…about regarding their capital structure,…and by extension their WACC,…is simply, what should it be?…As you now know, that question…is really a bit more complex than it seems,…but we can still come up…with a reasonable answer to the issue.…I'm in the 03_07_Begin Excel file.…Once we've gone through and built out…a complete set of choices regarding capital structure…and we understand how both debt and equity…will influence our WACC, we're now prepared…to analyze and make recommendations…to firm executives to help them choose capital structure.…
As we've seen, the WACC that we have,…will depend on greatly on the level…of debt cost and equity cost.…But there's really a tradeoff here.…The lower our WACC is, the more projects we can take on,…but in order to get a lower WACC,…we need to use less in the way of debt.…Now, as we see looking at our WACC computations,…it's not just about having…the highest credit rating possible.…
What we see here is that the lowest WACC…is actually for firms with a triple B rating,…
- Capital budgeting in Excel
- Using Excel in project selection
- Analyzing capital structure using Excel
- Estimating weighted average cost of capital (WACC)
- Applying Excel to operational budgeting
- Cash flow budgeting
- Stress test tools for budgets
Skill Level Intermediate
Excel 2016: Power Query (Get & Transform)with Oz du Soleil1h 49m Intermediate
Excel: Analyzing and Visualizing Cash Flowswith Curt Frye1h 16m Intermediate
1. Critical Tasks in Corporate Finance
2. Project Selection in Excel
3. WACC and Capital Structure in Excel
4. Operational Budgeting in Excel
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