WACC
Determine cost of equity using CAPM (capital asset pricing model) Cost of Equity = Risk-Free Rate + Beta * (Market Rate of Return – Risk-Free Rate) The market rate of return refers to the returns generated by the market in which the ABC Company’s stock is traded. The beta of the stock refers to the risk level of the individual
Continue reading Weighted average cost of capital (WACC) Weighted average cost of capital (WACC) is a calculation of a firm’s cost of capital in which each category of capital is proportionately weighted. Companies raise money from all sources of capital, including common stock, preferred stock, bonds and any other long-term debt, are included in a WACC calculation. Different securities are expected to generate different returns. The weighted average cost of capital (WACC) is the rate
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