Weighted Average Cost Of Capital

United States Steel Corporation (USX1.DE)

20.645 €

-0.30 (-1.46%)
Share price $ 20.645
Beta 2.140
Diluted Shares Outstanding 196.72
Cost of Debt
Tax Rate 22.55
After-tax Cost of Debt 1.88%
Risk-Free Rate
Market Risk Premium
Cost of Equity 13.844
Total Debt 4,082
Total Equity 4,061.31
Total Capital 8,143.31
Debt Weighting 50.13
Equity Weighting 49.87

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.