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
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