Weighted Average Cost Of Capital

Aon plc (AON)


+2.84 (+0.93%)
Share price $ 307.08
Beta 0.867
Diluted Shares Outstanding 233.10
Cost of Debt
Tax Rate 35.01
After-tax Cost of Debt 2.01%
Risk-Free Rate
Market Risk Premium
Cost of Equity 7.781
Total Debt 10,423
Total Equity 71,580.35
Total Capital 82,003.35
Debt Weighting 12.71
Equity Weighting 87.29

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.