# Calculating WACC | WACC Calculation Example

 17
Krisztina, UK

Calculating WACC | WACC Calculation Example

I have been asked to calculate the WACC using the following info: Capital structure: Ordinary shares (fully paid) :1000000, preference shares: (11%) 400000, debentures: (10%) 600000. The ordinary share holders expect a divident of 14% per year. Corporate tax is estimated at 30%.
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I did a bit of work on the above challenge, but I'm not sure if I'm on the right track... could someone point out if there are any mistakes? (600,000/2.000,000 * 10% * (1-30%)) + (400,000/2.000,000 * 11%) + (1.000,000/2.000,000 * 14%) = 19.2% Thank you for any help provided.

Rating

 0
Mudedla Srinivas Kumar, India

Calculation of WACC

Though your calculation seems O.K. factoring for Cost of Equity would have made your calculation more refined. which is as follows: Cost of Equity should be : Risk Free return + Beta*Market price.

 0
Antonio Villa Mardon
Economist, Peru

WACC

You need to modify the cost of equity as follows: CE = RfR + B ((Rm-RfR), being RfR the risk free r... Sign up

 0
bhavik, India

Response to Calculation of WACC

Though the calculation is correct, you could have calculated KE using the formula given below i.e. K... Sign up

 1
Student (MBA), Pakistan

WACC Calculation

As regards to this calculation, I got a result of 11.3% instead of 19.2%, without taking into accoun... Sign up

 2
Rishi R Koirala
Teacher, Nepal

WACC Calculation

If you calculate the WACC the following way: 600,000 / 2,000,000 * 10% * (1 - 0.3) + 400,000 / 2,00... Sign up

 0
Blessing Katuka, Zimbabwe

Calculation of WACC

Normally the following steps must be done to calculate WACC: - Determine different sources of finan... Sign up

 2
Ahid Moghal
Teacher, United Kingdom

Calculation of WACC

I calculate using a tableau with 5 columns. That makes life much easier, and you can see the whole c... Sign up