Calculate WACC using the percentages included

Accounting
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Jun 7th, 2015

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Weighted average cost of capital (WACC) is the average after-tax cost of a company’s various capital sources, including common stock, preferred stock, bonds and any other long-term debt.


WACC is calculated by multiplying the cost of each capital source (debt and equity) by its relevant weight, and then adding the products together to determine the WACC value:

WACC = E/V*Re+D/V*Rd*(1-Tc)

Where:

  • Re = cost of equity
  • Rd = cost of debt
  • E = market value of the firm’s equity
  • D = market value of the firm’s debt
  • V = E + D
  • E/V = percentage of financing that is equity
  • D/V = percentage of financing that is debt
  • Tc = corporate tax rate


I hope this helps. Time that is allocated to handle the question is not enough, I request you add me more time so that I finish it up, though am having some hitches with my notebook. Thanks for your patience





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Jun 7th, 2015

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Jun 7th, 2015
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Jun 7th, 2015
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