IBM

An example of the calculation of the weighted-average cost of capital

Cost of Equity
Riskfree rate
Beta
Market return
Cost of Equity
Cost of Debt
Rate
Taxrate
Cost of Debt

4.40%
1.09
12%
12.68%

5.36%
36%
3.43%

Amount of Equity
Shares
Price
Value

Amount of Debt
Book value
Adjustment
Value
Total Capital

WACC

Cost of Equity
Riskfree rate
Beta
Market return
Cost of Equity
Cost of Debt
Rate
Taxrate
Cost of Debt

9.59%

4.40%
1.09
12%
12.68%

12.00%
50%
6.00%

Amount of Equity
Shares
Price
Value

Amount of Debt
Book value
Adjustment
Value
Total Capital

WACC

12.68%

0.943
130
122.59

61.7
1
61.7
184.29

25000
10
250000

61.7
1
61.7
250061.7

demand
price
holding cost / carrying cost
ordering cost

d
p
h
s

EOQ

37500000

EOQ
Orders per year
Time between Successive orders

150000
75
11.25
125

1,826
82
3

3333333 1825.742