# Calculator to Calculate WACC and Its Cost

#### WACC Calculator

The Finansialpost WACC Calculator uses reliable methods and tested formulas to calculate the cost of equity, debt, preferred stock, and WACC.

Here, I will explain how the calculator works and the formulas used for each component.

## Formula Used in Calculator to Calculate Cost of Equity

In calculating the cost of equity, the Finansialpost WACC Calculator uses two different methods: the Gordon Growth Model and CAPM.

### a. Gordon Growth Model

The formula used to calculate the cost of equity with the Gordon Growth Model is as follows:

Cost of Equity | Expected Dividends / Stock Prise + Dividend Growth |
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Cost of Equity = D / P + g |

This method is based on the estimated expected dividends from the company and future dividend growth.

The resulting cost of equity will reflect the expected rate of return by shareholders.

### b. CAPM (Capital Asset Pricing Model)

The formula used to calculate the cost of equity using the CAPM method is as follows:

Formula for Cost of Equity | |
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Cost of Equity | Risk-Free Rate + Stock Beta * (Market Return - Risk-Free Rate) |

Cost of Equity = Rf + β * (Rm - Rf) |

This method combines the risk-free interest rate, the systematic risk of the stock measured by beta, and the market return to calculate the relevant cost of equity with the investment risk.

## Formula Used in Calculator to Calculate Cost of Debt

In calculating the cost of debt, the Finansialpost WACC Calculator uses the Yield to Maturity (YTM) method. The formula used is as follows:

Formula for Cost of Debt | |
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YTM | (Coupon Rate + ((Par Value - Bond Price) / Years to Maturity)) / ((Par Value + Bond Price) / 2) |

Cost of Bond | YTM + Coupon Rate |

Tax Effected Cost | Cost of Bond * (1 - Tax Rate) |

YTM refers to the expected rate of return from bonds, while the coupon rate is the coupon rate given by the bonds. By combining these two components, the calculator will produce an accurate cost of debt.

Additionally, the calculation of the cost of debt on the Finansialpost WACC Calculator automatically takes into account the tax savings effect according to the tax rate you input.

## Formula Used in Calculator to Calculate Cost of Preferred Stock

In calculating the cost of preferred stock, the Finansialpost WACC Calculator uses the Perpetual Dividend Discount Model. The formula used is as follows:

Formula for Cost of Preferred Stock | |
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Cost of Preferred Stock | Dividend Per Share / Stock Price |

Cost of Preferred Stock = D / P |

Metode ini menghitung dividen per saham dari saham preferen dan membaginya dengan harga saham preferen saat ini.

## Formula Used in Calculator to Calculate WACC

WACC is the weighted average of the cost of equity, debt, and preferred stock, reflecting the expected rate of return by shareholders and lenders.

The formula used to calculate WACC is as follows:

Formula for WACC (Weighted Average Cost of Capital) | |
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WACC | (Cost of Equity * Equity Percentage) + (Cost of Debt * Debt Percentage) + (Cost of Preferred Stock * Preferred Stock Percentage) |

WACC = (Ke * E) + (Kd * D) + (Kp * P) |

In this formula, each cost of capital is multiplied by the corresponding capital percentage. The percentages of equity, debt, and preferred stock are based on the company's capital structure.

The calculation of the percentages is automatically performed by the Finansialpost WACC Calculator when you input the market value numbers of each capital.