Question

Aswath: Why do you use a cumulative WACC in your 3-stage FCFF model?

Answer 1

If your cost of capital changes over time, you have to look at the cumulated cost of capital. A year-specific cost of capital is like a forward rate for that year...

Answer 2

That makes sense. Thank You

Answer 3

I do have one question: What exactly do you mean by a forward rate for that year? In regards to the year-specific cost of capital