[HelpHelpHelp :)]

Hey everyone,

Does anybody know what these components of WACC stand for? NINJA book just states the formula and doesn’t explain the terms:

WACC = (wtd x kd) + (wtpf x kpf) + (wte x ke)

Thanks in advance! 🙂

The happiest people don't have the best of everything, they just MAKE the best of everything!

We can do it!! 🙂

[mtaylo24]

W/ WACC its usually weight x cost of cap for debt, preferred stock (or equity), and common stock (or equity). Debt gets taxed. I.e 20% debt at 10% cost of cap, 30% Preferred stock at 10% cost of cap, 50% Common stock at 8% cost of cap. Tax rate is 40%

so

D = 20% x 6% (10% * 1- 40%) = 01.2%
PS = 30% x 10% = 3%
CS = 50% x 8% = 4 %

1.2% + 3% + 4% = 8.2% WACC

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[HelpHelpHelp :)]

Got it, thank you so much!! 🙂

The happiest people don't have the best of everything, they just MAKE the best of everything!

We can do it!! 🙂

[Author]

Replies