Definition: The weighted average cost of capital (WACC) is a financial ratio that calculates a company’s cost of financing and acquiring assets by comparing the debt and equity structure of the business. In other words, it measures the weight of debt and the true cost of borrowing money or...
If the company believes that a merger, for example, will generate a return higher than its cost of capital, then it's likely a good choice for the company. However, if it anticipates a return lower than its investors are expecting, there might be better uses for that capital. ...
To understand the Weighted Average Cost of Capital, let’s take a simple example. Suppose you want to start a small business! You go to the bank and ask if you need a loan to start. A bank looks at your business plan and tells you that it will lend you the loan, but there is on...
To calculate WACC, you will need to read through a quarterly statement to find the factors used in our example of weighted average cost of capital. While current market capitalization and the tax rate is easy to find, the market value of debt requires investors to calculate the entire debt l...
For example, if a company gets a $3,000 loan from the bank with a 5% interest rate, the cost of debt for that loan is 5%. The cost of a company’s equity is much harder to calculate. The process for determining the cost of a business’s equity is called the capital asset ...
Use this WACC Calculator to calculate the weighted average cost of capital based on the after-tax cost of debt and the cost of equity
企业为股东创造的价值即企业收益超出投资成本的部分, 企业的投资成本即用加权平均资本成本( Weighted Average Cost of Capital,WACC)来表示。通过与WACC进行比较,即可知预期进行的投资、项目等是否能够增加价值。 WACC和利率一样用百分比来表示,例如,如果一个公司的WACC为12%,这就意味着当此投资情况下,投资回报必须超...
Example Let’s assume that a company has the following capital structure: Weight Cost Equity 50% 20% Preferred Stock 20% 12% Debt 30% 8%* *Before-tax cost of debt Weighted Average Cost of Capital Will be calculated as follows: WACC = 0.30*0.08 (1-30%) + 0.20*0.12 + 0.50*0.20 = ...
Calculating the weighted average cost of capital is actually a bit easier than this formula might suggest. Let’s take a closer look using the example below. Example of How to Calculate WACC Here’s an example of how to calculate WACC. Using the formula above, suppose: ...
一个简单的例子揭示了现有的加权平均资本成本(WACC)计算公式违背了价值的可加性原理。 A simple example reveals that the existing weighted average cost of capital(WACC) formula for valuation c...