Weighted Average Cost Of Capital

VersaBank (VB.TO)


-0.06 (-%)
Share price $ 14.64
Beta 1.061
Diluted Shares Outstanding 21.12
Cost of Debt
Tax Rate 27.31
After-tax Cost of Debt 21.24%
Risk-Free Rate
Market Risk Premium
Cost of Equity 8.541
Total Debt 100.39
Total Equity 309.25
Total Capital 409.63
Debt Weighting 24.51
Equity Weighting 75.49

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.