- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Valuation
- Learning Module 27. Private Company Valuation
- Subject 5. Income Approach Methods of Private Company Valuation
CFA Practice Question
The lack of debt financing would usually tend to ______ a private company's WACC.
A. increase.
B. decrease.
C. uncertain (can increase or decrease).
Explanation: Private companies may rely more on equity financing which would increase its WACC. The higher cost of debt would have the same impact on its WACC.
User Contributed Comments 1
| User | Comment |
|---|---|
| akirchner1 | This assumes that debt financing is cheaper than equity financing. |