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Step-by-step Excel Guide

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8. Weighted average cost of capital (WACC)

In WACC section you should set values for the following parameters:
Tax rate
Target debt ratio (D / (D+E))
Cost of debt
Equity beta
Market risk premium
Riskfree interest rate

Based on these the model calculates WACC, which is used in DCF and EVA statements.


Click picture for full-size map.

See how WACC is calculated.

Why should I set WACC before estimates?

WACC is a key component when DCF fair value is calculated. Thus while making estimates, it is important that this component has right values. Otherwise, you would not see real fair value during the estimate process.

 


General instructions

Instructions for setting WACC parameters

 

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