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Weighted Average Cost of Capital

The weighted average cost of capital is the rate that a company is expected to pay on average to all its security holders to finance its assets.

The weighted average cost of capital equals the sum of the product of the total debt, 1 minus the tax rate, and the cost of debt and total equity times the cost of equity divided by the sum of the total debt and total equity.

Formula

QuantityVariable["WACC", "Unitless"] == (QuantityVariable["D", "Money"]*(1 - QuantityVariable["T", "Unitless"])*QuantityVariable[Subscript["r", "d"], "Unitless"])/(QuantityVariable["D", "Money"] + QuantityVariable["E", "Money"]) + (QuantityVariable["E", "Money"]*QuantityVariable[Subscript["r", "e"], "Unitless"])/(QuantityVariable["D", "Money"] + QuantityVariable["E", "Money"])

symbol description physical quantity
WACC weighted average cost of capital "Unitless"
D total debt "Money"
E total equity "Money"
T tax rate "Unitless"
rd cost of debt "Unitless"
re cost of equity "Unitless"

Forms

Examples

Get the resource:

In[1]:=
ResourceObject["Weighted Average Cost of Capital"]
Out[1]=

Get the formula:

In[2]:=
FormulaData[ResourceObject["Weighted Average Cost of Capital"]]
Out[2]=

Use some values:

In[3]:=
FormulaData[ ResourceObject["Weighted Average Cost of Capital"], {QuantityVariable[ \!\(\*SubscriptBox[\("r"\), \("e"\)]\),"Unitless"] -> Quantity[12, "Percent"], QuantityVariable["T","Unitless"] -> Quantity[35, "Percent"], QuantityVariable["D","Money"] -> Quantity[1000, "USDollars"], QuantityVariable[ \!\(\*SubscriptBox[\("r"\), \("d"\)]\),"Unitless"] -> Quantity[8, "Percent"], QuantityVariable["E","Money"] -> Quantity[1000, "USDollars"]}]
Out[3]=

Source Metadata

  • Creator:
  • Date: September 1980

Publisher Information