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Weighted Average Cost of Capital

on . Posted in Project Management Engineering

Weighted average cost of capital, abbreviated as WACC, helps in calcularing a firm's cost of financing by combining the cost debt and cost of equity structure togeather.

 

weighted average cost of capital Formula
\(\large{ WACC =  \left[ \left( WOE \; COE \right) + \left( WOD \; COD \right) \right] \; \left( 1 - TR \right)     }\)                 
Symbol
\(\large{ WACC }\) = weighted average cost of capital
\(\large{ COD }\) = cost of debt
\(\large{ COE }\) = cost of equity
\(\large{ TR }\) = tax rate
\(\large{ WOD }\) = weightage of debt
\(\large{ WOE }\) = weightage of equity

 

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