Syllabus B3cd. The Cost of CapitalCost of debt

WACC - Putting it all Together 4 / 4

WACC - Putting it all Together

So, you have studied all the bits in isolation, here’s where we get sexy and bring it all together..

So, this is kind of the proforma you need to set up, when you get a “Calculate the WACC..” question

DEBT/EQUITY COST Market Value “Interest”
Equity 10% 1,000 100
Loan 6% 800 48
Total 1,800 148

So we have paid “interest’ of 148 on capital of 1,800…

So the WACC is 148/1,800 = 8.2%