Calculation of WACC for companies not listed on stock markets as a variant of business risk management
DOI:
https://doi.org/10.31637/epsir-2025-2410Keywords:
CAPM, Finance, ROE, WACC, Companies, Stock Market, Management, Corporate RiskAbstract
Introduction: This research addresses the problem of applying the traditional Weighted Average Cost of Capital (WACC) formula to unlisted companies. It is argued that the dependence on stock market data limits its accuracy for these entities. Methodology: An adapted methodology is proposed that considers accounting shareholders' equity, the exclusion of debt without financial cost and the use of the weighted average cost of debt with financial cost, the historical Return on Equity (ROE) as the cost of equity. Results: In addition, the need to include employee profit sharing in the calculation of the tax shield and the incorporation of a prospective adjustment factor (FAM) to reflect market expectations are emphasized. This adaptation seeks to offer a more robust and relevant WACC valuation tool for financial decision-making, contributing to a more accurate valuation and sounder business development. Conclusions: In conclusion, the adoption of adjusted methodological approaches for determining WACC in non-public companies, as proposed in this study, is crucial for formulating strategic financial decisions within these organizations.
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