Weighted Average Cost Of Capital

The Cato Corporation (CATO)


-0.07 (-0.69%)
Share price $ 10.09
Beta 1.020
Diluted Shares Outstanding 21.11
Cost of Debt
Tax Rate 5.44
After-tax Cost of Debt 0.04%
Risk-Free Rate
Market Risk Premium
Cost of Equity 8.318
Total Debt 184.33
Total Equity 213.04
Total Capital 397.37
Debt Weighting 46.39
Equity Weighting 53.61

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.