Question

I need to calculate the wacc of a non public brazilian company that has negative net worth (unsecure liabilities). How shold I proceed to determine the D/E ratio? Thanks.

Answer 1

WACC is calculated with the formula of
weight of debt*cost of debt+weight of equity*ke

see..in the case of private company equity is the amount which company owners have invested and the reserves available with them but in most general case private company dont disclose the amount invested, it shows the value that they created. so very difficult to comment on this.

you can consider the average wacc of its listed competitors.
Else
can calculate the Wacc like:
Kd= interest*(1-marginal tax rate), that you will be available with.
Ke=Rf+Beta*(Rm-Rf), Risk free rate you can take 10year govt bond, beta you can take sector beta, Rm you can take CAGR of 10 year stock market return.

multiply Kd and Ke with their weights
total interest bearing debt and owner's equity+reserves

D/E=total interest bearing debt/owner's equity+reserves