Weighted Average Cost of Capital
R
WACC
= r
e
• (
E
/
V
) + r
d
• (
D
/
V
) • (1-t
c
)
r
e
= cost of equity E = market value of equity
r
d
= cost of debt D = market value of debt
V = E + D [enterprise value]
t
c
= corporate tax rate
Cost of Equity (%)
Cost of Debt (%)
Value of Equity ($)
Value of Debt ($)
Corporate tax rate (%)
Clear
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Example