Weighted Average Cost Of Capital

Horizon Technology Finance Corporat... (HRZN)


-1.61 (-12.13%)
Share price $ 11.66
Beta 1.156
Diluted Shares Outstanding 20.03
Cost of Debt
Tax Rate 1.42
After-tax Cost of Debt 4.60%
Risk-Free Rate
Market Risk Premium
Cost of Equity 9.093
Total Debt 257.61
Total Equity 233.52
Total Capital 491.13
Debt Weighting 52.45
Equity Weighting 47.55

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.