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Chapter 2

Overview

WACC = K e V E +K d V D
V E + V D V E + V D

WACC

Cost of Equity Cost of Debt

Dividend
valuation model DVM with

(DVM) with no dividend Irredeemable Redeemable
growth in growth
dividend
-

Equity

d d 0 (1 + g) i(1 – T)
K e = K e = K d = + g IRR
P o P o P o

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