Book chapter: This is a how-to-do-it chapter. In the
first section, we explain and derive the after-tax WACC
and use it to value a project and business. Then in
Section 19.2 we work through a more complex and
realistic valuation problem. Section 19.3 covers some
tricks of the trade: helpful hints on how to estimate
inputs and on how to adjust WACC when business risk or
capital structure changes. Section 19.4 turns to the APV
method. The idea behind APV is simple enough, but
tracing through all the financing side effects can be
tricky. We conclude the chapter with a
question-and-answer section designed to clarify points
that managers and students often find confusing. pdf
