The first webinar examined a number of common applications of the The Weighted Average Cost of Capital. This webinar explores challenges in the measurement and application of WACC. These challenges include:
(a) In the valuation community there is debate about how to best estimate many of the key inputs into the WACC calculation. Controversial issues include (a) how to estimate the market risk premium, (b) how to adjust for risk. We review these issues, and provide guidance as to current best practice;
(b) WACC and financial strategy. Aside from its role in valuation, the Weighted Average Cost of Capital is commonly used in discussions of financial strategy. We explore the severe limitations of WACC in this application, and present alternative models to help the Corporate Treasurer contribute to the debate about “what is my company’s optimal financial strategy?”
(c) WACC and asset based financings. We examine the relationship between asset based financing, such as leases, and the WACC.
Tony Carlton, Associate Professor, Applied Finance Centre, Macquarie University
Tony manages the Corporate Finance stream in Macquarie University’s Master of Applied Finance. Tony presents elective subjects including Advanced Valuation, Capital Allocation Strategies and Corporate Financial Strategy.
Prior to joining Macquarie University, Tony had over 25 years’ experience in the manufacturing, resource and agricultural industries. Senior roles included Executive General Manager, Corporate Finance & Strategy, and Group Treasurer, at CSR. His experience includes all aspects of corporate finance and strategy, including project evaluation, strategic portfolio analysis, and the development and execution of growth strategies. He managed a number of large acquisitions and divestments both in Australia and overseas, and a number of large scale balance sheet restructurings.
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