Description
The Weighted Average Cost of Capital (WACC) is a calculation of the firm’s total cost of capital based on its cost of equity and cost of debt. The calculation uses the market value of company equity to weight the cost of equity capital, and the amount of debt on the balance sheet to weight the cost of debt. The resulting percentage is then used to discount future cash flows.
Calculation
WACC% = (E% X Cost of Equity%) + (D% X Cost of Debt%)
Where E% = Market Cap / (Market Cap + Debt) X 100
And
Where D% = Debt / (Market Cap + Debt) X 100