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Weighted Average Cost of Capital

Dilip Joshi (CSA) (38 Points)

25 September 2009  

Hi

can anybody explain that "how to calculate the weighted average cost of capital" 

particularly how to calculate the weight part.

Thanks & Regards

Dilip 9881898023

 

 

 


 3 Replies

Vinay Desai (Treasury) (32 Points)
Replied 25 September 2009

The WACC formula:

Cost of Debt * % of Debt + Cost of Equity * % of Equity

Now the weights in this case:

If my Debt is Rs. 300 and my Equity is Rs. 100, my total capital employed will be Rs. 400

Now weight of Debt - 300/400 = 75%

and Weight of Equity = 100/400 = 25%

Hope it answers your query !!

 

 

1 Like

Ashish M (Chartered Accountant) (2726 Points)
Replied 25 September 2009

MULTIPLY THE COST OF A PARTICULAR COMPONENT OF CAPITAL STRUCTURE WITH ITS SHARE PROPORTION IN THE TOTAL VALUE OF THE CAPITAL STRUCTURE.................

 

FOR THE PURPOSES OF CALCULATING THE SHARE PROPORTION, MARKET VALUES CAN PROVIDE THE BETTER OPTION............

1 Like

ARUNA G V A (student) (42 Points)
Replied 26 September 2009

wow thankq soo much ....  Vinay and Ashish


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