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About
The weighted average cost of capital is an evaluation of the company's cost of capital and it combines each source of the firm's cost of capital in which includes preferred shares, common shares, debt, and also bonds. If your company is borrowed finance from both equity and debt, then combine the cost of equity and cost of debt in one combination which is used to measure the profitability of your company and this combination is called WACC.
Generally sources are divided into two categories: equity is the total value of all assets and debt is money that company takes as a loan. The cost of equity represents the worth of your company and convinces investors and stakeholders to invest in it.
The cost of debt simply means is a company has to always give back more money than it takes a loan. If the company's rate of return is higher than the WACC it is profitable for the company and if the rate of return is lower then the company is not able to cover its financing cost.
The formula for calculating weighted average cost of capital (WACC) is as follows:
WACC = E / (E + D) * Ce + D / (E + D) * Cd * (100% - Tr)
Where
- E - total equity
- D - total debt
- Ce - cost of equity
- Cd - cost of debt
- Tr - corporate tax rate
What can you do with WACC Calculator?
- It helps to calculate WACC and helps to measure the cost of capital of the company.
- Users can see the accurate value of the WACC.
- This calculator helps to share your calculations by URL.