Question: When working through a potential target purchase, a team member contends that a firm should use historical or book weights when estimating the firms WACC
When working through a potential target purchase, a team member contends that a firm should use historical or book weights when estimating the firms WACC because they are easily observable and can guide the estimation process. Provide a counter argument for a rapidly growing firm that raises large amounts of external capital. Would the answer change for a well-established firm that does not expect to raise capital?
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