Finance
Calculate WACC
=(B1/(B1+B2))*B3+(B2/(B1+B2))*B4*(1-B5)How it works in Excel
- B1/(B1+B2) is the share funded by equity.
- B3 is the cost of equity.
- B2/(B1+B2) is the share funded by debt.
- B4*(1-B5) is the cost of debt after tax.
- Use market values where you can, not book values.
- Debt gets the tax adjustment because interest is usually tax deductible.
- Format the cell as a percentage.
The idea in general
It is the average return a company must earn to satisfy everyone who funds it.
What I assumed
- Equity is in B1, debt is in B2, their costs are in B3 and B4, and the tax rate is in B5.
Check the result on your own data before relying on it.