Weighted Average Cost of Capital Solution

STEP 0: Pre-Calculation Summary
Formula Used
Weighted average cost of capital = ((Market value of the firm’s equity/Firm Value)*Cost of Equity)+(((Market Value of the Firm’s Debt/Firm Value)*Cost of Debt)*(1-Corporate Tax Rate))
WACC = ((E/V)*Re)+(((MV/V)*Rd)*(1-Tc))
This formula uses 7 Variables
Variables Used
Weighted average cost of capital - The weighted average cost of capital (WACC) is the minimum return that a company is supposed to give on an average to satisfy its entire security proprietors to finance its assets.
Market value of the firm’s equity - The market value of equity is the total dollar market value of all of a company's outstanding shares.
Firm Value - Firm Value is a measure of a company's total value, often used as a more comprehensive alternative to equity market capitalization.
Cost of Equity - The cost of equity is the return a firm theoretically pays to its equity investors, i.e., shareholders, to compensate for the risk they undertake by investing their capital.
Market Value of the Firm’s Debt - The Market Value of the Firm’s Debt is the total dollar debt value of all of a firm such as bonds and loans.
Cost of Debt - The cost of debt is the interest a company pays on its borrowings.
Corporate Tax Rate - The corporate tax rate is the rate at which levy is placed on the profit of a firm to raise taxes.
STEP 1: Convert Input(s) to Base Unit
Market value of the firm’s equity: 500 --> No Conversion Required
Firm Value: 500000 --> No Conversion Required
Cost of Equity: 200000 --> No Conversion Required
Market Value of the Firm’s Debt: 2000 --> No Conversion Required
Cost of Debt: 10000 --> No Conversion Required
Corporate Tax Rate: 10 --> No Conversion Required
STEP 2: Evaluate Formula
Substituting Input Values in Formula
WACC = ((E/V)*Re)+(((MV/V)*Rd)*(1-Tc)) --> ((500/500000)*200000)+(((2000/500000)*10000)*(1-10))
Evaluating ... ...
WACC = -160
STEP 3: Convert Result to Output's Unit
-160 --> No Conversion Required
FINAL ANSWER
-160 <-- Weighted average cost of capital
(Calculation completed in 00.004 seconds)

Credits

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23 Business Calculators

Macaulay Duration
Go Macaulay Duration = sum(x,1,5,Cash Flow Number,((Cash Flow/(1+Yield to Maturity (YTM)/Compounding Periods))^Cash Flow Number))*(Time in Years/Present Value)
Weighted Average Cost of Capital
Go Weighted average cost of capital = ((Market value of the firm’s equity/Firm Value)*Cost of Equity)+(((Market Value of the Firm’s Debt/Firm Value)*Cost of Debt)*(1-Corporate Tax Rate))
Total Inventory Cost
Go Total Inventory Cost = Carrying cost per unit per year*(Quantity of Each Order/2)+Fixed cost per order*(Demand in units per year/Quantity of Each Order)
Acid Test Ratio
Go Acid Test Ratio = (Cash+Accounts Receivable+Short Term Investments)/Current Liabilities
Economic Order Quantity
Go Economic Order Quantity = ((2*Fixed cost per order*Demand in units per year)/Carrying cost per unit per year)*(1/2)
Return on Capital Employed
Go Return on capital employed = (Earnings Before Interest and Taxes/(Total Assets-Current Liabilities))*100
Diluted Earnings per Share
Go Diluted Earnings per Share = Net Income/(Average Shares+Other Convertible Securities)
Inventory Shrinkage
Go Inventory Shrinkage = ((Recorded Inventory-Actual Inventory)/Recorded Inventory)*100
Modified Duration
Go Modified Duration = Macaulay Duration/(1+Yield to Maturity (YTM)/Coupon Periods)
Target Inventory Investment
Go Target Inventory Investment = Projected Annual Cost of Goods Sold from Stock Sales/Target Inventory Turnover
Beginning Inventory
Go Beginning Inventory = Cost of Goods Sold-Purchases+Ending Inventory
Retention Ratio
Go Retention Ratio = (Net Income-Dividend)/Net Income
Contribution Margin per Unit
Go Contribution Margin per Unit = Sales Price per Unit-Variable Cost per Unit
Operating Expense Ratio
Go Operating Expense Ratio = (Operating Expense/Gross Operating Income)*100
Break-Even Point
Go Break Even Point = Fixed Costs/Contribution Margin per Unit
Estimated Earnings
Go Estimated Earnings = Forecasted Sales-Forecasted Expense
Debt Coverage Ratio
Go Debt Coverage Ratio = Net Operating Income/Debt Service
Dividends Per Share
Go Dividends Per Share = Total Dividends/Number of Shares
Solvency Ratio
Go Solvency Ratio = (Shareholders Fund*100)/Total Assets
Estimate at completion
Go Estimate at Completion = Actual Cost+Bottom up ETC
Percentage off
Go Percentage Off = 1-(Selling Price/Original Price)
Preferred Stock
Go Preferred Stock = Dividend/Discount Percentage
Days in Inventory
Go Days in Inventory = 365/Inventory Turnover

Weighted Average Cost of Capital Formula

Weighted average cost of capital = ((Market value of the firm’s equity/Firm Value)*Cost of Equity)+(((Market Value of the Firm’s Debt/Firm Value)*Cost of Debt)*(1-Corporate Tax Rate))
WACC = ((E/V)*Re)+(((MV/V)*Rd)*(1-Tc))

How to Calculate Weighted Average Cost of Capital?

Weighted Average Cost of Capital calculator uses Weighted average cost of capital = ((Market value of the firm’s equity/Firm Value)*Cost of Equity)+(((Market Value of the Firm’s Debt/Firm Value)*Cost of Debt)*(1-Corporate Tax Rate)) to calculate the Weighted average cost of capital, The Weighted Average Cost of Capital (WACC) is the minimum return that a company is supposed to give on average to satisfy its entire security proprietors to finance its assets. Weighted average cost of capital is denoted by WACC symbol.

How to calculate Weighted Average Cost of Capital using this online calculator? To use this online calculator for Weighted Average Cost of Capital, enter Market value of the firm’s equity (E), Firm Value (V), Cost of Equity (Re), Market Value of the Firm’s Debt (MV), Cost of Debt (Rd) & Corporate Tax Rate (Tc) and hit the calculate button. Here is how the Weighted Average Cost of Capital calculation can be explained with given input values -> -160 = ((500/500000)*200000)+(((2000/500000)*10000)*(1-10)).

FAQ

What is Weighted Average Cost of Capital?
The Weighted Average Cost of Capital (WACC) is the minimum return that a company is supposed to give on average to satisfy its entire security proprietors to finance its assets and is represented as WACC = ((E/V)*Re)+(((MV/V)*Rd)*(1-Tc)) or Weighted average cost of capital = ((Market value of the firm’s equity/Firm Value)*Cost of Equity)+(((Market Value of the Firm’s Debt/Firm Value)*Cost of Debt)*(1-Corporate Tax Rate)). The market value of equity is the total dollar market value of all of a company's outstanding shares, Firm Value is a measure of a company's total value, often used as a more comprehensive alternative to equity market capitalization, The cost of equity is the return a firm theoretically pays to its equity investors, i.e., shareholders, to compensate for the risk they undertake by investing their capital, The Market Value of the Firm’s Debt is the total dollar debt value of all of a firm such as bonds and loans, The cost of debt is the interest a company pays on its borrowings & The corporate tax rate is the rate at which levy is placed on the profit of a firm to raise taxes.
How to calculate Weighted Average Cost of Capital?
The Weighted Average Cost of Capital (WACC) is the minimum return that a company is supposed to give on average to satisfy its entire security proprietors to finance its assets is calculated using Weighted average cost of capital = ((Market value of the firm’s equity/Firm Value)*Cost of Equity)+(((Market Value of the Firm’s Debt/Firm Value)*Cost of Debt)*(1-Corporate Tax Rate)). To calculate Weighted Average Cost of Capital, you need Market value of the firm’s equity (E), Firm Value (V), Cost of Equity (Re), Market Value of the Firm’s Debt (MV), Cost of Debt (Rd) & Corporate Tax Rate (Tc). With our tool, you need to enter the respective value for Market value of the firm’s equity, Firm Value, Cost of Equity, Market Value of the Firm’s Debt, Cost of Debt & Corporate Tax Rate and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.
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