Weighted Average Cost of Capital

Written by Jerry Ratzlaff on . Posted in Manufacturing 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

\(\large{ WACC =  \left[ \left( WOE \; COE \right) + \left( WOD \; COD \right) \right] \; \left( 1 - TR \right)     }\)                   

\(\large{ WACC }\) = 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

 

Tags: Equations for Manufacturing