Weighted Average Cost of Capital

Weighted average cost of capital is the average cost of different sources of finance. For calculating weighted average cost of capital, we can use following steps:-

Ist Step

Calculate proportion % of different source of finance in capital structure. It will be W.

2nd Step

Calculate cost of equity capital, cost of debt and cost of retain earning and it will be X.

3rd Step

Calculate the product of W and X by multiply W with X.

4th Step

Calculate the total of product W and X and it will be ∑WX

5th Step

Calculate the total of W and it will be ∑W

6th Step

Calculate the WACC by dividing ∑WX with ∑W