Weighted Average Cost Of Capital

U.S. Bancorp (USB)


+2.92 (+8.49%)
Share price $ 37.375
Beta 1.001
Diluted Shares Outstanding 1,510
Cost of Debt
Tax Rate 20.22
After-tax Cost of Debt 3.61%
Risk-Free Rate
Market Risk Premium
Cost of Equity 8.314
Total Debt 71,045
Total Equity 56,436.25
Total Capital 127,481.25
Debt Weighting 55.73
Equity Weighting 44.27

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.