Weighted Average Cost Of Capital

Berkshire Hathaway Inc. (BRK-B)


+0.27 (+0.09%)
Share price $ 292.34
Beta 0.915
Diluted Shares Outstanding 2,265.27
Cost of Debt
Tax Rate 19.60
After-tax Cost of Debt 2.93%
Risk-Free Rate
Market Risk Premium
Cost of Equity 7.083
Total Debt 114,262
Total Equity 662,228.70
Total Capital 776,490.70
Debt Weighting 14.72
Equity Weighting 85.28

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.