What is WACC (Weighted Average Cost Capital)? The definition of this term is very simple and easy to grasp. In an organization, the capital is contributed through several factors including preferred stock and debt. This is where WACC comes into play. It defines the cost of capital and in the process, all sources that contribute to it are weighted. Calculating WACC is not a simple task to complete. If you have a lot of time and concrete financial knowledge, calculating WACC would not be a problem for you. However, most people lack strong knowledge of finance. Thus, when they start the calculation process, a lot of time is taken and mistakes are made as well.
What is the procedure of using this tool?
If you talk about the steps of using this tool, they are very simple. Here is what the users have complete for calculating the WACC value. In a nutshell, this tool is one of the easiest for calculating the value of WACC.
1. Enter the cost percentage of equity and debt
The first two percentages you need to enter are of the equity and debt. Consider that, in this case, the cost percentage is 15 and debt percentage is 13.
2. Enter the corporate tax percentage, equity amount and debt amount
In the next step, you need to enter three further inputs. These include the corporate tax percentage, equity amount and debt about. In this example, consider that the corporate tax percentage is 12, equity amount is 15000 and debt amount is 1200. Enter these values in the provided text boxes and click the calculate button so that the output can be checked.
3. Viewing the produced outputs
When you have entered all the inputs, do nothing but click the “calculate” button. The value of WACC would be shown instantly on the screen. In accordance with the inputs entered above, the value of WACC would be 14.74 %.
Who can extract benefits by using this calculator?
This quality WACC calculator can be used by different types of users according to the uses they have. For instance, we can take the example of students studying financial analysis and financial modelling. To prepare for examinations, they can use this tool while practicing. It would help them in knowing whether the calculated answers are correct or not.
Financial analysts cannot afford to make mistakes while performing calculations. Thus, when they are calculating the WACC for a value set, a high quality calculator is needed so that the correct answers are attained without spending loads of time. With this online calculator, you can reduce the calculation time on a major scale.
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