Weighted Average Cost Of Capital

Enterprise Bancorp, Inc. (EBTC)


-1.13 (-3.18%)
Share price $ 34.37
Beta 0.538
Diluted Shares Outstanding 12.05
Cost of Debt
Tax Rate 24.37
After-tax Cost of Debt 6.42%
Risk-Free Rate
Market Risk Premium
Cost of Equity 6.058
Total Debt 88.08
Total Equity 414.20
Total Capital 502.29
Debt Weighting 17.54
Equity Weighting 82.46

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.