Valuation Distortion from WACC Misclassification
- DAISAKU KADOMAE
- Aug 10
- 1 min read
Key Points:
Naïve WACC (7.0%) overvalues the enterprise by $530m compared to refined WACC (8.8%).
Same cash flows and growth rate, but different hybrid capital treatment causes a 26% valuation gap.
A 50–100 bps WACC change can significantly affect valuations, especially in capital-intensive sectors.
Hybrid-heavy markets like Singapore REITs, Philippine conglomerates, and Malaysian preference share issuers are particularly sensitive.
Precision in WACC calculation is critical for M&A, project finance, and fairness opinions.
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