Weighted Average Cost Of Capital

HP Inc. (HPQ)


-0.22 (-0.74%)
Share price $ 29.64
Beta 1.002
Diluted Shares Outstanding 1,220
Cost of Debt
Tax Rate 13.42
After-tax Cost of Debt 2.50%
Risk-Free Rate
Market Risk Premium
Cost of Equity 8.236
Total Debt 8,778
Total Equity 36,160.80
Total Capital 44,938.80
Debt Weighting 19.53
Equity Weighting 80.47

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.