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Weighted Average Cost of Capital. This means the overall (blended) rate of return that a business (or other financial asset) has to generate to satisfy (a) its shareholders, and (b) its loan providers.

For example, if a business has an equity/debt ratio of 1:3, and the shareholders expect a 15% return and the lenders expect a 5% return, then the WACC would be 7.5%.

The equity and debt rates of return are in theory determined by the business's risk profile which can be calculated with reference to the risk-free rate, using the Capital Asset Pricing Model.

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How do you calculate WACC?

how to calculate WACC how to calculate WACC how to calculate WACC how to calculate WACC


Why WACC represents an opportunity cost to investors?

Wacc Farmula


What happens to the WACC when the federal reserve tightens credit?

WACC will increase.


What impact does WACC have on capital budgeting and structure?

What impact does WACC have on capital budgeting and structure?


Would NPVs change if the WACC changed?

Yes, NPVs would change if the Weighted Average Cost of Capital (WACC) changed. A higher WACC would result in a lower NPV, while a lower WACC would result in a higher NPV. This is because the discount rate used in calculating NPV is based on the WACC.


Why doesn't everyone calculate WACC the same?

because of WACC nature, there are no same utility, and that's why none make same calculation. so WACC=X2+2X3+5X2=0 ? because of WACC nature, there are no same utility, and that's why none make same calculation. so WACC=X2+2X3+5X2=0 ?


What is the relationship between wacc and discount rate of return?

relationship between WACC and required rate of return.


What is the advantage of WACC?

All else equal, the weighted average cost of capital (WACC) of a firm increases as the beta and rate of return on equity increases, as an increase in WACC notes a decrease in valuation and a higher risk.


What is the WACC of Disney corporation?

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What is after-tax wacc?

WACC stands for weighted average cost of capital. So after tax means cost of capital after taxes are taken into account.


What is after tax wacc?

WACC stands for weighted average cost of capital. So after tax means cost of capital after taxes are taken into account.


What do you mean by horizon value in finding the NPV of a stock?

horizon value = FCF(1+g)/WACC - g where FCF = Free cash flows at current time period or sub zero g= growth rate of firm WACC=weighted average cost of capital ----