Weighted Average Cost Of Capital

International Paper Company (IP)


+0.86 (+2.45%)
Share price $ 36.105
Beta 1.043
Diluted Shares Outstanding 392.40
Cost of Debt
Tax Rate 0.46
After-tax Cost of Debt 5.51%
Risk-Free Rate
Market Risk Premium
Cost of Equity 8.441
Total Debt 5,862
Total Equity 14,167.60
Total Capital 20,029.60
Debt Weighting 29.27
Equity Weighting 70.73

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.