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View Full Version : Weighted average cost of capital


sillk
Feb 20, 2009, 09:26 PM
I'm trying to calculate the weighted average cost of capital to the table below;

Assets $100

Debt $10
Equity $90


Debt/assets after tax cost of debt cost of equity cost of capital
0% 8% 12%
10% 8 12
20% 8 12
30% 8 13
40% 9 14
50% 10 15
60% 12 16

berlinevi
Feb 23, 2009, 09:43 AM
0%(0.0)(0.08)+(1.0)(0.12)=0.120
10%(0.1)(0.08)+(0.9)(0.12)=0.116
20%(0.2)(0.08)+(0.8)(0.12)=0.112
30%(0.3)(0.08)+(0.7)(0.13)=0.115
40%(0.4)(0.09)+(0.6)(0.14)=0.120
50%(0.5)(0.10)+(0.5)(0.15)=0.125
60%(0.6)(0.12)+(0.6)(0.16)=0.136

The cost of capital is a weighted average:
k= (weight)(cost of debt) + (weight)(cost of equity)