Wacc


Function Wacc(debt, equity, rD, rE, tC)

Calculates the after-tax weighted average cost of capital, based on the expected return on a portfolio of all the firm's securities. Used as a hurdle rate for capital investment.

Syntax:

Wacc(debt, equity, rD, rE, tC: Numeric)

Parameters:

«debt»
the market value of debt
«equity»
the market value of equity
«rD»
the expected return on debt
«rE»
the expected return on equity
«tC»
the corporate tax rate

Definition:

(((1 - tC)*debt*rD)/(debt + equity)) + ((equity*rE)/(debt + equity))

Library

Financial library functions (Financial Library.ana)

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Example

Wacc(1000000, 3000000, 0.08, 0.16, 0.35) → 0.133

See Also

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