Unformatted text preview: n theory and should give similar results if they are used properly.
However, in an individual problem, one of the methods will frequently be much easier to implement.
Both WACC and FTE implicitly assume that the market value debt/equity ratio is constant over time. If it changes, then we would have to adjust the discount rate every year. WACC and FTE become complicated.
When the debt ratio is constant over time, WACC and FTE are easier to use. But do not provide other benefits of APV.
When the debt ratio will not be constant over time, but you know the dolla...
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- Spring '13
- Prime number, APV, target capital structure