1. Identify every source of capital financing, including: (a) each type of debt and (b) each class of stock.
2. Determine the market value of each source of capital. If a source of capital has no market value, then estimate its present value. Denote this market value as IVa for the first source of capital and IVb for the second, etc.
3. Determine the return on each source of capital. For debt, this is pretax borrowing rate. For equity, it is the cost of equity capital rate using the capital asset pricing model or a multi-factor model. Denote each rate as ra, rb, etc.
4. Now find the weighted average of the rates, based on the values of the different sources of capital. Here's the formula if you have two sources of capital, "a" and "b."

WACC = [ra x IVa/(IVa+IVb)] + [rb x IVb/(IVa+IVb)]