Calculating WACC | WACC Calculation

WACC > Best Practices

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Calculating WACC | WACC Calculation
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%.
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.

Calculation of WACC
Mudedla Srinivas Kumar
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 sho...Sign up

Antonio Villa Mardon, Economist, Peru, Member
You need to modify the cost of equity as follows:
CE = RfR + B ((Rm-RfR), being RfR the risk free rate B, the beta Rm Expected market return.
...Sign up

Response to Calculation of WACC
bhavik, Student (MBA), India, Member
Though the calculation is correct, you could have calculated KE using the formula given below i.e. KE = D/PE+G
Where, D = Dividend = the amount ...Sign up

WACC Calculation
Muhammad Wasim, Student (MBA), Pakistan, Member
As regards to this calculation, I got a result of 11.3% instead of 19.2%, without taking into account the beta and risk free return. Can you please co...Sign up

WACC Calculation
Rishi R Koirala, Teacher, Nepal, Member
If you calculate the WACC the following way:
600,000 / 2,000,000 * 10% * (1 - 0.3) + 400,000 / 2,000,000 * 11% + 1,000,000 / 2,000,000 * 14% = 11...Sign up

Calculation of WACC
Blessing Katuka
Normally the following steps must be done to calculate WACC:
- Determine different sources of finance.
- Calculate marginal component costs ...Sign up

Calculation of WACC
Ahid Moghal, Teacher, United Kingdom, Member
I calculate using a tableau with 5 columns. That makes life much easier, and you can see the whole calculation in one go:
The 5 columns are:
...Sign up

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Best Practices
  • Calculating WACC | WACC Calculation


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