Weighted Average Cost Of Capital

Franklin Universal Trust (FT)

$6.805

-0.01 (-0.22%)
Share price $ 6.805
Beta 0.668
Diluted Shares Outstanding 25.09
Cost of Debt
Tax Rate 0.00
After-tax Cost of Debt 3.92%
Risk-Free Rate
Market Risk Premium
Cost of Equity 6.868
Total Debt 64.95
Total Equity 170.72
Total Capital 235.67
Debt Weighting 27.56
Equity Weighting 72.44
Wacc

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.