Weighted Average Cost Of Capital

ADT Inc. (ADT)

$8

-0.02 (-0.25%)
Share price $ 8
Beta 1.991
Diluted Shares Outstanding 778
Cost of Debt
Tax Rate 27.60
After-tax Cost of Debt -3.42%
Risk-Free Rate
Market Risk Premium
Cost of Equity 12.163
Total Debt 9,693
Total Equity 6,224
Total Capital 15,917
Debt Weighting 60.90
Equity Weighting 39.10
Wacc

There are a number of methods that can be used to determine discount rates. A good approach – and the one we’ll use in this tutorial – is to use the weighted average cost of capital (WACC) – a blend of the cost of equity and after-tax cost of debt. A company has two primary sources of financing – debt and equity – and, in simple terms, WACC is the average cost of raising that money. WACC is calculated by multiplying the cost of each capital source (debt and equity) by its relevant weight and then adding the products together to determine the WACC value.