Im assuming you are using the unlevered formula and if you are could you explain by detail, by plugging in values into the formula, how you got to a betaRead more . With debt capital, quantifying risk is fairly straightforward because the market provides us with readily observable interest rates. Provides a reliable discount rate for evaluating the present value of future cash flows. = 31.6825r = 2.6273 Please refer to Table 4-5 on page 147 in the text for descriptions of each function or decision area. The five basic functions or decision areas in production are process, capacity, inventory, workforce and quality. "However you get it either on your own or from a research report on a company you're interested in WACC shows a firm's blended cost of capital from all sources of financing. A company provides the following financial information: What is the company's weighted-average cost of capital? rs = rRF +Bs x (rm-rRF). How do investors quantify the expected future sensitivity of the company to the overall market? Now the weighted average cost of capital is = 4.5% + 2.4% + 4.375% = 11.275%. WACC = Weight of debt*after tax cost of debt + weight of equity*cost of equity In our completestep by step financial modeling training program we build a fully integrated financial model for Apple and then, using a DCF valuation, we estimate Apples value. That rate may be different than the ratethe company currently pays for existing debt. The cost of equity, represented by Re in the equation, is hard to measure precisely because issuing stock is free to company. Before we explain how to forecast, lets define effective and marginal tax rates, and explain why differences exist in the first place: The difference occurs for a variety of reasons. WACC Calculations - BrainMass Finally, calculate the WACC by adding the weighted cost of debt and the weighted cost of equity. Enroll in The Premium Package: Learn Financial Statement Modeling, DCF, M&A, LBO and Comps. 10 to Rs. At the present time, Water and Power Company (WPC) has 5-year noncallable bonds with a face value of $1,000 that are outstanding. Your IP: WACC. The cost of capital is based on the weighted average of the cost of debt and the cost of equity. How Higher Interest Rates Raise a Company's WACC, Hurdle Rate: What It Is and How Businesses and Investors Use It, Weighted Average Cost of Capital (WACC) Explained with Formula and Example, Cost of Capital: What It Is, Why It Matters, Formula, and Example, Internal Rate of Return (IRR) Rule: Definition and Example, Optimal Capital Structure Definition: Meaning, Factors, and Limitations, Financing: What It Means and Why It Matters.