Weighted Average Cost Of Capital

Best Buy Co., Inc. (BBY)


+3.40 (+4.77%)
Share price $ 74.69
Beta 1.435
Diluted Shares Outstanding 249.30
Cost of Debt
Tax Rate 18.85
After-tax Cost of Debt 0.52%
Risk-Free Rate
Market Risk Premium
Cost of Equity 9.899
Total Debt 3,888
Total Equity 18,620.22
Total Capital 22,508.22
Debt Weighting 17.27
Equity Weighting 82.73

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.