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WACC is calculated by multiplying the cost of each capital component by its proportional weight and then summing:

WACC = (E/V) * Re + (D/V) * Rd * (1-Tc)

Where:
Re = cost of equity
Rd = cost of debt
E = market value of the firm's equity
D = market value of the firm's debt
V = E + D
E/V = percentage of financing that is equity
D/V = percentage of financing that is debt
Tc = corporate tax rate

No-where in above is Return on Market data required (market value of Equity = share price, market value of Debt = Bond price)

2007-04-17 20:41:32 · answer #1 · answered by Steve B 7 · 0 0

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