{"id":169,"date":"2011-08-06T13:56:08","date_gmt":"2011-08-06T06:56:08","guid":{"rendered":"https:\/\/mbabullshit.com\/blog\/?p=169"},"modified":"2017-09-14T12:12:03","modified_gmt":"2017-09-14T05:12:03","slug":"wacc-weighted-average-cost-of-capital-how-to-calculate-wacc","status":"publish","type":"post","link":"https:\/\/mbabull.com\/blog\/2011\/08\/06\/wacc-weighted-average-cost-of-capital-how-to-calculate-wacc\/","title":{"rendered":"WACC Weighted Average Cost of Capital in 3 Minutes (YouTube Video Below)"},"content":{"rendered":"<h2>3-Minute Overview: (Also Download Free Cheat Sheet at Bottom)<\/h2>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/Wz6Dwbp2XiI\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h2>Part 1<\/h2>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/JKJglPkAJ5o\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h2>Part 2<\/h2>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/jF_G1N4O5_M\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h2>WACC Exam Preparation Premium Video (Free Preview)<\/h2>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/vepRiFw-UCc\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h2>To Watch FULL Premium videos <span style=\"color: #0000ff;\"><a style=\"color: #0000ff;\" href=\"https:\/\/mbabullshit.com\/blog\/video-plan-170626\/\" target=\"_blank\">Click Here<\/a><\/span><\/h2>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/mbabullshit.com\/blog\/wp-content\/uploads\/2013\/03\/WACC-Infographic-Weighted-Average-Cost-of-Capital-e1362457574105.jpg\" alt=\"\" width=\"500\" height=\"742\" \/><br \/>\n<strong>Download my FREE Cheat-Sheet PDF for <a title=\"WACC Weighed Average Cost of Capital\" href=\"https:\/\/mbabullshit.com\/blog\/wp-content\/uploads\/2013\/03\/WACC-CheatSheet-Weighted-Average-Cost-of-Capital-2.pdf\" target=\"_blank\">WACC Weighed Average Cost of Capital click here<\/a><\/strong><\/p>\n<ul>\n<li>Money (capital) needed to run a company comes from either borrowing (debt) or the owners\u2019 money (equity).<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li>The COST of capital is either the interest payment on the debt, or the required profit that the owners want in return for their investment (in MBA bullshit language: \u201cexpected return\u201d).<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li>The expected return or COST OF EQUITY is determined by another financial model, the <a href=\"https:\/\/mbabullshit.com\/blog\/2011\/08\/06\/capm-capital-asset-pricing-model\/\">CAPM<\/a> or the <a href=\"https:\/\/mbabullshit.com\/blog\/2011\/08\/06\/capm-capital-asset-pricing-model\/\">CAPITAL ASSET PRICING MODEL<\/a>.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li>When you COMBINE BOTH the interest rate of debt AND the \u2018expected return\u2019 of the investors\/owners, we get the total cost of capital.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li>If the cost of debt (e.g. interest) and cost of equity (expected return) are different, then we have to get an AVERAGE of the two to get our COST OF CAPITAL<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li>Cost of capital is expressed as a percentage; because it\u2019s compared to the total capital (as a percentage of the total capital).\u00a0 Just like bank loan interest is expressed as a percentage of\u00a0 your total loan.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li>What if your company has more debt vs. equity, OR vice versa? Then our formula must give more importance or \u2018WEIGHT\u2019 to whichever is bigger; and must give LESS weight to whichever is SMALLER.\u00a0 Thus, we have the WACC or Weighted Average Cost of Capital concept.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li><span style=\"font-size: 13px; line-height: 19px;\">This is the basic WACC or Weighted Average Cost of Capital Formula:<\/span><\/li>\n<\/ul>\n<p align=\"center\"><b>WACC<\/b> = (Debt Proportion)(Cost of Debt %)(1 &#8211; tax rate %) + (Equity Proportion)(Cost of Equity %)<\/p>\n<ul>\n<li>To understand this formula step-by-step in action, watch my free video below.<\/li>\n<\/ul>\n<h2>Step-by-step WACC CalculationPart 1<\/h2>\n<p><iframe loading=\"lazy\" src=\"http:\/\/www.youtube.com\/embed\/JKJglPkAJ5o\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h2>Step-by-step WACC CalculationPart 2<\/h2>\n<p><iframe loading=\"lazy\" src=\"http:\/\/www.youtube.com\/embed\/jF_G1N4O5_M\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n","protected":false},"excerpt":{"rendered":"<p>3-Minute Overview: (Also Download Free Cheat Sheet at Bottom) Part 1 Part 2 WACC Exam Preparation Premium Video (Free Preview) To Watch FULL Premium videos Click Here Download my FREE Cheat-Sheet PDF for WACC Weighed Average Cost of Capital click here Money (capital) needed to run a company comes from either borrowing (debt) or the [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-169","post","type-post","status-publish","format-standard","hentry","category-free-video-tutorials"],"_links":{"self":[{"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/posts\/169","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/comments?post=169"}],"version-history":[{"count":35,"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/posts\/169\/revisions"}],"predecessor-version":[{"id":5410,"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/posts\/169\/revisions\/5410"}],"wp:attachment":[{"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/media?parent=169"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/categories?post=169"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/tags?post=169"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}