A Brief Note On Weighted Average Cost Of Capital

2014 Words Apr 11th, 2016 9 Pages
WACC (Weighted Average Cost of Capital) according to AstraZeneca

This report will explain what is and how the WACC works and which methods to use for this particular company, AstraZeneca, with relevant data reference.

What is WACC ?
WACC = E/V x Re + D/V x Rd x (1-Tc)
“A calculation of a company’s cost of capital in which every source of capital is weighted in proportion to how much capital it contributes to the company”. http://financial-dictionary.thefreedictionary.com/WACC WACC is the acronym of “Weighted Average Cost of Capital” which calculates the cost of a company capital from all sources, common stock, preferred stock, long terms debts bonds ect.., WACC increases respectively when the rate of return on equity and beta increases which means that the increase of the WACC will indicate the increase in risk and decrease in valuation, and on the other hand a low WACC will show that the company gets its capital cheap, in fact WACC it is known as a mixture of cheap debt and expensive equity.
Companies are founded through debt and/ or equity, this organizations or people known as investors offer their money expecting a return, thus the money they offered plus an additional amount known as a profit, WACC will in this case show to the investors the “opportunity cost” of taking the risk on investing their money on a particular company. The WACC calculations is financially accepted and seen as a reliable financial tool for both investors and companies, as it is important…
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