Determinants of the Weighted Average Cost of Capital (WACC)

debt ratio

recession scenario(

r

f

= 0.01)

inflation scenario(

r

f

= 0.1)

back to normal(

r

f

= 0.03)

marketrisk premium

extreme risk aversion(MRP = 0.2)

very low risk aversion(MRP = 0.01)

back to normal(MRP = 0.05)

β

debt

tax rate

β

equity,unlevered

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The (after-tax) weighted average cost of capital (WACC) of a company is the most important measure of cost of capital used in practice. In this Demonstration, you can enter all determinants of the WACC and the WACC is calculated. Additionally, you can investigate the dependency of the WACC on the respective input parameters.