Weighted Average Cost Of Capital

3M Company (MMM)

$104.29

-0.02 (-0.02%)
Share price $ 104.29
Beta 0.963
Diluted Shares Outstanding 567.60
Cost of Debt
Tax Rate 9.62
After-tax Cost of Debt 4.52%
Risk-Free Rate
Market Risk Premium
Cost of Equity 8.152
Total Debt 16,200
Total Equity 59,195
Total Capital 75,395
Debt Weighting 21.49
Equity Weighting 78.51
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.