Weighted Average Capital Cost (WACC)
\[WACC=w_d\bullet r_d(1-T)+w_e\bullet r_e\]
where
\(w_d\) - weidht of debt (from balance sheet)
\(r_d\) - rate for debt (from company report)
\(T\) - tax rate
\(w_e\) - weidht of equity (from balance sheet)
\(r_d\) - rate for equity
\[r_d=r_f+(r_m-r_f) \bullet \beta_L +SP + CSR\]
where
\(r_f\) - rate of return for risk-free investments (10yrs stae bonds)
\(r_m\) - risk of investment in market (specific for country)
\(\beta\) - company correlation with market (could be calculated for company or taken for industry)
\(SP\) - company size premium
\(CSR\) - company specific risk (quality of management, stable customers etc)
Beta coefficient should be corrected to account capital structure \[\beta_L = \beta (1+ \frac{D}{E})\]
Page last modified on July 02, 2021, at 08:18 PM
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