Weighted Average Cost Of Capital

Investar Holding Corporation (ISTR)

$20

-0.26 (-1.28%)
Share price $ 20
Beta 0.456
Diluted Shares Outstanding 10.94
Cost of Debt
Tax Rate 19.27
After-tax Cost of Debt 7.29%
Risk-Free Rate
Market Risk Premium
Cost of Equity 6.030
Total Debt 129.87
Total Equity 218.72
Total Capital 348.60
Debt Weighting 37.26
Equity Weighting 62.74
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.