WACC Formula Excel Template

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Let us take an example of a company DCF Inc. to illustrate the computation of WACC. During FY19, the company’s real estat
generated a return of ~5.5%.  As per the latest annual report, the company has an outstanding debt of $50.0 million and com
valued at $70.0 million. During that period the company has incurred $2.0 million as interest expense on its debt. On the ot
the risk-free rate of return is 1.5%, the market return is 4.0% and the company’s beta is 1.2x. Calculate WACC based on the g
information and check whether the investment return of 5.5% exceeds its cost of capital if the tax rate is 32%.

Particulars Value
Total Debt $50,000,000
Total Equity $70,000,000
Interest Expense $2,000,000
Tax Rate 32%
Risk-free Return 1.5%
Beta 1.2
Market Return 4.0%

Total Capital is calculated using the formula given below

Total Capital = Total Debt + Total Equity

Total Capital $120,000,000

Weightage of Debt is calculated using the formula given below

Weightage of Debt = Total Debt / Total Capital

Weightage of Debt 0.417

Cost of Debt is calculated using the formula given below

Cost of Debt = Interest Expense / Total Debt

Cost of Debt 4.0%

Weightage of Equity is calculated using the formula given below

Weightage of Equity = Total Equity / Total Capital

Weightage of Equity 0.583

Cost of Equity is calculated using the formula given below

Cost of Equity = Risk-Free return + Beta * (Market Return - Risk-free Return)

Cost of Equity 4.5%

WACC is calculated using the formula given below

WACC = Weightage of Equity * Cost of Equity + Weightage of Debt *
Cost of Debt * (1 - Tax Rate)

WACC 3.76%
 g FY19, the company’s real estate investment
ing debt of $50.0 million and common equity
st expense on its debt. On the other hand,
x. Calculate WACC based on the given
the tax rate is 32%.