Browse MBAs SECTION 3: Corporate Finance & Valuation

The WACC Estimator

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The WACC Estimator

Help me estimate the weighted average cost of capital for this company.

Capital structure: [DEBT AMOUNT, EQUITY AMOUNT, OR TARGET WEIGHTS]
Cost of debt: [INTEREST RATE, OR DESCRIBE THE DEBT]
Tax rate: [RATE]
Cost of equity inputs: [RISK-FREE RATE, BETA, MARKET RISK PREMIUM — OR
HELP ME REASON ABOUT THEM]

Provide:
1. After-tax cost of debt, with the tax shield shown
2. Cost of equity via CAPM, with each input explained
3. The weights and the resulting WACC
4. How sensitive WACC is to beta and the equity weight
5. The judgment calls in this estimate and reasonable ranges for each

Be explicit that small changes here swing valuations a lot — give me a
range, not false precision.

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