Weighted Average Cost Of Capital

Franklin Street Properties Corp. (FSP)


-0.01 (-0.63%)
Share price $ 1.57
Beta 0.863
Diluted Shares Outstanding 103.34
Cost of Debt
Tax Rate 15.72
After-tax Cost of Debt 4.21%
Risk-Free Rate
Market Risk Premium
Cost of Equity 7.565
Total Debt 0.76
Total Equity 162.24
Total Capital 163
Debt Weighting 0.47
Equity Weighting 99.53

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.