Weighted Average Cost Of Capital

TransAlta Corporation (TA.TO)


-0.24 (-1.90%)
Share price $ 12.675
Beta 1.083
Diluted Shares Outstanding 271
Cost of Debt
Tax Rate -41.32
After-tax Cost of Debt 7.56%
Risk-Free Rate
Market Risk Premium
Cost of Equity 8.616
Total Debt 3,267
Total Equity 3,434.93
Total Capital 6,701.93
Debt Weighting 48.75
Equity Weighting 51.25

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.