Weighted Average Cost Of Capital

Summer Infant Inc

Summer Infant Inc (SUMR)

0.19 (+0.87%)
Share price $ 22
Beta 2.104
Diluted Shares Outstanding 2.10
Cost of Debt
Tax Rate -35.68
After-tax Cost of Debt 5.00%
Risk-Free Rate
Market Risk Premium
Cost of Equity 19.210
Total Debt 48.67
Total Equity 46.22
Total Capital 94.89
Debt Weighting 51.30
Equity Weighting 48.70

There are a number of methods that can be used to determine discount rates. A good approach – and the one we’ll use in this tutorial – is to use the weighted average cost of capital (WACC) – a blend of the cost of equity and after-tax cost of debt. A company has two primary sources of financing – debt and equity – and, in simple terms, WACC is the average cost of raising that money. WACC is calculated by multiplying the cost of each capital source (debt and equity) by its relevant weight and then adding the products together to determine the WACC value.