Explain and show components leading to weighted average cost of capital in Excel.
- [Instructor] WACC is a key tool for the firm.…Now it's time to see how we would actually calculate…WACC in the real world.…I'll show you how to calculate equity…and debt cost capital, and compute WACC based…on a preset equity debt mix.…I'm in the 03_02Begin Excel file.…Now, what we see here is that we have…a cost of debt and a cost of equity…for each of the different credit ratings…from AAA down to single-B.…
Now, notice that as the company get riskier,…their cost of debt and cost of equity…both decline over time.…And equity, because it's riskier…than debt, is consistently more expensive.…From the company's point of view,…they want to have the lowest cost…of capital possible, right?…The company cares very much about their…weighted average cost of capital.…Why?…Well, because it determines how profitable the firm is.…When a company considers individual projects,…and is trying to decide whether or not it should invest…in them, it's going to compare the return…on that project, the project's IRR against WACC.…
The company is gonna be looking at their own WACC…
- Capital budgeting in Excel
- Using Excel in project selection
- Analyzing capital structure using Excel
- Estimating weighted average cost of capital (WACC)
- Applying Excel to operational budgeting
- Cash flow budgeting
- Stress test tools for budgets
Skill Level Intermediate
Excel 2016: Power Query (Get & Transform)with Oz du Soleil1h 49m Intermediate
Excel: Analyzing and Visualizing Cash Flowswith Curt Frye1h 16m Intermediate
1. Critical Tasks in Corporate Finance
2. Project Selection in Excel
3. WACC and Capital Structure in Excel
4. Operational Budgeting in Excel
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