WACC - Weighted Average Cost of Capital

[@billbateman1207]

One of the best explanationd of WACC that is not just a calculation demonstration.

[@mcco3691]

The visuals really helped me remember these formulas. Thank you!

[@ayoadeyo]

Thank you so much! WACC has finally clicked for me :)

[@misterstonks2411]

Great explanation. Finally got this one down! Thank you.

[@DerChef-qi5nk]

What if there is no market value of equity because it is a private company. Do I just take the book value of the equity?

[@mn8541]

Great tutorial!

[@md.khalilurrhaman2900]

Excellent

[@Smiirffable]

Where do you find the market risk premium and the risk free rate for a security?

[@JustN0nso]

I wish I watched this before my fmva exam

[@JonesDawg]

So the cost of debt has nothing to do with the actual interest expenses but is equal to the average yield to maturity? For example, a firm issues 1000 dollar bond for 10 years with 10% interest rate, so every year the interest expense is 100 dollars but the market interest rate has increased thus the bond is priced below par and the YTM is 12%. So the cost of debt would be 12% and not the 10% which the company actually pays? This seems strange to me. Could you explain further, thanks! Great stuff.

[@CFI_Official]

Yield to maturity is the rate of return of a fixed-rate security (such as a bond) an investor earns for purchasing the security at the current market price and holds it until the security has matured, and that all interest and coupon payments are made in a timely fashion. Because the cost of debt reflects the default risk of a company, as well as the level of interest rates in the market, looking at the current YTM of observable debt, would be most appropriate to determine the cost of debt of a public company.

[@jackthebeanstalkdelohio5146]

To find the cost of debt through wacc, will I have to calculate corporate's tax?

[@affanhuzairi6714]

Its only debt right? Not total liabilities?

[@peterheine6240]

Hello I have a question. Why is the income tax rate taken into account when calculating the WACC?

[@mohammedmahfouz1422]

because interest of bond is tax deductible

[@felixchikosi2012]

i owe you my distinction

[@ntcuong01ct1]

I have a question: cost of capital = net revenue * WACC, right?.

[@teamsage6119]

CAPM formula I'm I the only one seeing the error

[@user-of7km6rq6e]

Cost of Capital ≈ WACC