How do you calculate WACC?

Published On - January 22, 2023

Josh Corporate Banking / Commercial Banking / Private Debt, Corporate Development, Financial Modeling, FP&A, Investment Banking, Private Equity

The weighted average cost of capital weights out the three sources of capital: common shares, debt, and preferred shares.

WACC formula= % Equity x Cost of Equity + % Debt x Cost of Debt x (1- Tax Rate) + % Preferred Shares x Cost of Preferred Shares

% Equity = Equity / (Equity + Debt + Preferred Equity)
% Debt = Debt / (Equity + Debt + Preferred Equity)
% Preferred Equity = Preferred Equity / (Equity + Debt + Preferred Equity)