easy · Investment Banking
Why is the Weighted Average Cost of Capital (WACC) used as the discount rate in an Unlevered Free Cash Flow DCF?
- It is a requirement mandated by GAAP for valuation purposes.
- It reflects the required return for both debt and equity providers
- It is simply the interest rate charged on the company's senior debt tranche.
- It represents only the cost of equity and excludes any return owed to debt holders.
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