Weighted Average Cost Of Capital

Heritage Insurance Holdings, Inc. (HRTG)


+0.03 (+0.95%)
Share price $ 3.19
Beta 0.889
Diluted Shares Outstanding 27.99
Cost of Debt
Tax Rate 1.72
After-tax Cost of Debt 6.49%
Risk-Free Rate
Market Risk Premium
Cost of Equity 6.984
Total Debt 120.76
Total Equity 89.28
Total Capital 210.04
Debt Weighting 57.49
Equity Weighting 42.51

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.