A Brief Note On Weighted Average Cost Of Capital
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 (1Tc)
“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://financialdictionary.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.
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