WACC (Weighted Average Cost of Capital) Excel Calculator
Originally published: 10/07/2018 07:40
Last version published: 19/10/2018 15:57
Publication number: ELQ-57072-4
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WACC (Weighted Average Cost of Capital) Excel Calculator

WACC calculation template to help the user think about all of the components of their WACC calculation

Weighted average cost of capital (or WACC) is often used as a discount rate in an discounted cash flow (DCF). WACC assesses the cost of capital required in a business.

Often, the interest rate on debt is an easily accessible figure. However, cost of equity can be harder to calculate. Academic theory has come up with the Capital Asset Pricing Model (CAPM). CAPM is a multifaceted calculation. There are multiple components that a user needs to think about such as the risk free rate, Beta, Alpha, and the equity risk premium.

This tool helps the user to think about all the components of WACC and CAPM in order to produce a thought out discount rate for their model.

Results include:
-Cost of equity
-Cost of debt

Inputs include:
-Risk free rate
-Equity Risk Premium
-Alpha adjustment (including the unlisted company premium, reliance on owner management, minority shareholder premium, size premium) - for these assumptions ensure that you enter a reasonable percentage risk adjustments for each component
-Debt interest rate
-Tax rate (for the tax shield)
-Debt:Equity ratio

When using the model:
It couldn't be any simpler - just enter your assumptions into the yellow cells after careful consideration of what is appropriate.

This Best Practice includes
1 Excel Template

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Further information

To aid the user to thoughtfully calculate the right discount rate for their model using WACC

Someone looking for a discount rate calculation

Someone who does not understand the basics of discount rates

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