Hello David,
I have some concerns over computing WACC and specifically cost of debts for commercial banks. In general, deposits could be considered as debts of commercial banks. However, while there are different term of deposits from current accounts to very long term deposit, the standardized guidance to estimate cost of debt for a corporate is interest rate on long term debt. This is not very correct for commercial banks since current accounts and saving accounts also account for a very important source of fund. Would you mind clarifying the issue for me? Many thanks!!!
I have some concerns over computing WACC and specifically cost of debts for commercial banks. In general, deposits could be considered as debts of commercial banks. However, while there are different term of deposits from current accounts to very long term deposit, the standardized guidance to estimate cost of debt for a corporate is interest rate on long term debt. This is not very correct for commercial banks since current accounts and saving accounts also account for a very important source of fund. Would you mind clarifying the issue for me? Many thanks!!!
