25. Miles-Ezzell formula (S18-1) In footnote 14, we referred to the MilesEzzell discount rate formula, which assumes
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25. Miles-Ezzell formula (S18-1) In footnote 14, we referred to the Miles–Ezzell discount rate formula, which assumes that debt is not rebalanced continuously, but at one-year intervals.
Derive this formula. Then use it to unlever Sangria’s WACC and calculate Sangria’s company cost of capital. Your answer will be slightly different from the company cost that we calculated in Section 18-3. Can you explain why?
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Related Book For
Principles Of Corporate Finance
ISBN: 9781264080946
14th Edition
Authors: Richard Brealey, Stewart Myers, Franklin Allen, Alex Edmans
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