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.

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

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