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Calculate the average cost to all investors and creditors to identify your companies WACC (Weighted Average Cost of Capital) using the WACC Calculator.
|Weighted Average Cost of Capital (WACC):||11.725|
Every business runs on investments and evaluating your potential investments is very important. WACC is an excellent financial measurement that help a firm's management identify whether the investment in a new project will be profitable. WACC is basically a calculation of a firm's cost of capital. Increase in WACC denotes decreases in valuation and increase in risk.
The WACC calculator created by iCalculator performs the complex calculations involved in calculation WACC with the simplicity of just a few inputs and clicks. Enter the following details into the calculator to calculate WACC for your investment:
On the basis of your inputs the calculator will provide you with the WACC of your company.
You can benefit from using the WACC calculator in many ways:
All sources of capital, including common stock, preferred stock, bonds and all other long term debts, are included in a WACC calculation. WACC is calculated by applying the following formula:
Debt and equity are the two components that constitute a company's capital funding. The methods to determine the cost of debt and equity are different. Let's take a look:
Cost of debt (Rd): Calculation of cost of debt is a simple process. It's calculated by using the market rate that a company is paying on its debt. If a firm is paying a rate other than market rate, it can be replaced by the estimated appropriate market rate.
The net cost of a company's debt is used for the calculation. It's the total cost of debt minus the tax deductions. This is because the tax deductions are available on interest paid that are generally company's benefit.
Calculating the cost of equity (Re) is rather tricky. Equity does not have any fixed price, but this does not mean that there is no cost of equity. Shareholders of the company will expect to receive a certain amount of return on their investments. If the company fails to pay the returns, the investors will simply sell off their shares and that will decrease the value of the stock. The cost of equity can be defined as the amount a firm spends to maintain the value of its stock that satisfies its investors.
The WACC method is used by:
Calculating WACC is not as simple as it seems. It becomes challenging when it comes to certain elements such as cost of equity that are not consistent values. Different businesses may report this figure differently for various reasons. Even though WACC could be a valuable method to assess potential returns on the investments, this should always be used along with other available metrics.
WACC is an important metric used for different financial purposes, but it must be used very carefully. The components should be expressed in the market value. Faulty inputs result in a faulty WACC value that can ultimately lead to ill-informed investment decisions. A company should often reassess its WACC in order to make efficient investment decisions and benchmark success as well as refining forecasting models via robust data analysis.
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