Weighted Average Cost of Capital + DCF Analysis
Originally published: 03/07/2023 12:18
Last version published: 08/01/2024 09:25
Publication number: ELQ-22189-2
View all versions & Certificate
certified

Weighted Average Cost of Capital + DCF Analysis

This template guides the user through each step to come up with the weighted average cost of capital (WACC) and includes sensitivity tables for WACC and NPV.

Description
When you start to dive deeper into DCF Analysis work, it will become clear that the discount rate you enter needs to have some quantitative reasoning behind it. This is essentially a measure of risk for an investment in a new business or project. Using the WACC as a means to come up with a discount rate is the most common approach.

I've looked through a lot of online calculators and explanations for this. What I found was some errors, so I took the time to put together a 100% accurate template with formulas that allows the user to enter each component of the weighted average cost of capital calculation. This produces a rate that has some reasoning behind it.

Going further, I also added two sensitivity analysis tables that let the user sensitize the expected return and risk-free rate in order to see resulting WACC outputs when those two variables change (up to 6 inputs for each). I also did the same thing in the second table but made the output the NPV, which is based on a DCF Analysis schedule the user can fill out (simply entering negative and positive cash flows into).

There is a Google Sheet version included as well, but it doesn't have the sensitivity tables like the Excel version because data table logic is not native to G Sheets.

This template is also included in two bundles:
- All Models Bundle: https://www.eloquens.com/tool/P8Y4TX4v/finance/financial-forecasting-models/financial-models-120-useful-and-usable-logic
- Accounting Tools: https://www.eloquens.com/tool/axKzHNRV/finance/accounting/accounting-bundle-useful-excel-templates-for-accounting-department

This Best Practice includes
1 Excel model and 1 Tutorial Video

Acquire business license for $45.00

Add to cart

Add to bookmarks

Discuss

Further information

Produce a reasonable WACC output.

General debt and/or equity funded businesses / projects.


0.0 / 5 (0 votes)

please wait...