How to Solve WACC
Can someone please help me solve this problem. I know how to get Equity Beta and Risk Free rate rf. How do i solve for the rest.
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Capital Structure Weight in Equity = Market Cap/Market Cap + Total Debt Capital Structure weight in Debt = Total Debt/Market Cap + Total Debt
Cost of Equity = CAPM = Rf * Beta + Equity Premium (Return on S&P - risk free rate) Cost of Debt = YTM or historical borrowing rate
WACC = (Cost of Debt (1-tax rate) * % of Debt in Capital Structure) + (Cost of Equity * % of Equity in Capital Structure)
Might want to check your CAPM formula...
Ri = Rf + B * ERP
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