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How can calculate the weighted average cost of capital and its relation of the company value?

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Question ajoutée par yousry sadek , Group Finance Manager , Tal Holding Co
Date de publication: 2017/10/01
Dewan Mahmudul Hasan
par Dewan Mahmudul Hasan , Acaount Officer , Mikayel Distributions & services Ltd

After you have calculated the cost of capital for all the sources of debt and equity that you use, then it is time to calculate the weighted average cost of capital for your company. You weight the percentage of the capital structure that each source of debt andequity capital is by the cost of the source ofcapital.

MUHAMMAD ASSAD KHAN
par MUHAMMAD ASSAD KHAN , Paid Internship , Hazara University , Mansehra

TOTAL FIRM EQUITY IN  % * ( COST OF EQUITY ) +  TOTAL FIRM DEBT IN % * ( COST OF DEBT)  *       (1 - FIRM TAX )  

yousry sadek
par yousry sadek , Group Finance Manager , Tal Holding Co

By sum the cost of equity multiplied by the percentage equity in capital structure with the weighted average cost of debit multiplied by the percentage debt in capital structure. And the value of the company can be computed as the present value of the cash flow it produces discounted by the costs of capital used to finance it. The lower the overall cost of capital the higher the value of the company. 

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