The Evaluation of Methodology Influence on the WACC Value: The Case of the Czech Republic

Abstract

The article presents the methodology and results of the calculations of WACC depending on the use of different methods for their determination. Regarding the fact that some methods use the data from the capital market and are based on the presumption of high liquidity of company's shares, the investigated sample of companies included the following companies: ČEZ, a.s., Komerčni banka, a.s., O2 Czech Republic, a.s., UNIPETROL, a.s., as they are the only ones traded at the stock market Prague Stock Exchange within the category PRIME. Tested methods were Model CAPM (in several variants), Market model, and Modular method. The performed research demonstrated the key influence of the chosen method for the calculation of WACC on the resulting value of WACC. The research confirmed that the information on the value of the WACC can be considered as misleading without knowing the used method for WACC calculation.