Loan Pools comprise the myriads of loans firms use to finance the operations of an entity. Two areas of relevance of loan pools are the determination of the cost of capital and estimation of the value of equity. In determining the weighted average cost of capital, the existence of loan pools requires careful treatment. To arrive at the cost of debt, the valuer isolates and computes the cost of each debt component in the loan pool followed by an estimate of the weighted cost of debt rather than the average cost of debt. To arrive at the fair market value of equity, the loan is deducted from the enterprise value. It is normally the market value, and not the book value, of loan (as recorded in the books) that is deducted from the enterprise value. The market value of a loan is a measure of how much it will cost to sell the loan of the firm which is influenced by the circumstances of the firm and developments of the financial market. When a firm has a loan pool, the market value of each of the loan components in the pool is estimated separately. To arrive at the market value of equity, the market value of the loan pool is deducted from the enterprise value. The market value of each loan component in the pool can be higher or lower than the book value of the firm’s loan depending on the circumstances of the business and developments on the financial market.