From the course: Excel: Financial Functions in Depth (2022)

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Calculating weighted average cost of capital (WACC)

Calculating weighted average cost of capital (WACC) - Microsoft Excel Tutorial

From the course: Excel: Financial Functions in Depth (2022)

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Calculating weighted average cost of capital (WACC)

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- [Instructor] In chapter three, we used the NPV function to work out the net present value. And one of the inputs to this was the cost of capital. We're going to have a look now at where to get the numbers that make up the weighted average cost of capital, affectionately known as the WACC. We can work it out if we know the total value of the organization and how much of it is debt and how much of it is equity. So the cost of debt is pretty easy to track down as it's just the market interest rate of how much it would cost us to finance the amount of debt that we're carrying. But there's a bit more to working out the cost of equity. And a common way to do this is to use CAPM or otherwise known as the capital asset pricing model. This calculates the expected rate of return for an investment. I'll talk about the risk-free rate and the market risk premium in a moment but let's first talk a bit about the beta and what that…

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