Difference between revisions of "Wacc"

Revision as of 20:19, 25 June 2007

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.

Example

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

Expects: debt, equity, rD, rE, and tC all as numeric

Parameters: debt is the market value of debt;
equity is the market value of equity;
rD is the expected return on debt;
rE is the expected return on equity;
tC is the corporate tax rate.

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

Syntax: Wacc(debt, equity, rD, rE, tC : Numeric)
Library: Financial library functions
More Examples and Tips: None yet.

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-[[Category:Doc Status D]] <!-- For Lumina use, do not change -->
+[[Category:Doc Status C]] <!-- For Lumina use, do not change -->
+===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.
+; Example
+ wacc(1000000, 3000000, 0.08, 0.16, 0.35)  &rarr; 0.133
+; Expects: '''debt''', '''equity''', '''rD''', '''rE''', and '''tC''' all as numeric
+; Parameters: '''debt''' is the market value of debt;<br>'''equity''' is the market value of equity;<br>'''rD''' is the expected return on debt;<br>'''rE''' is the expected return on equity;<br>'''tC''' is the corporate tax rate.
+Definition: (((1 - tC) * debt * rD)/(debt + equity)) + ((equity * rE)/(debt + equity))
+; [[Syntax]]: Wacc(debt, equity, rD, rE, tC : Numeric)
+; Library: [[Financial library functions]]
+; More Examples and Tips:  ''None yet.''