Weighted Average Cost Of Capital

Village Bank and Trust Financial Co... (VBFC)


+1.49 (+2.81%)
Share price $ 54.5
Beta 0.695
Diluted Shares Outstanding 1.46
Cost of Debt
Tax Rate 19.33
After-tax Cost of Debt 16.39%
Risk-Free Rate
Market Risk Premium
Cost of Equity 6.687
Total Debt 8.76
Total Equity 79.56
Total Capital 88.32
Debt Weighting 9.92
Equity Weighting 90.08

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.