WACC Computation

⚠️ **Finance warning / Avertissement finance** : informational only, not investment advice. WACC is the discount rate and the hurdle rate at once, so a small error in it quietly reprices every valuation and project decision downstream: an understated WACC approves projects that destroy value and overstates what a business is worth, losses follow from decisions taken on it, and no figure here is a promise of return. Curated by Skill Harbor: the WACC computation skill of GAJETOso/financeskills, written from the seat of a corporate finance manager. Use it when a valuation or capital budgeting decision needs its discount rate: cost of equity, cost of debt, CAPM, beta unlevering, risk-free rate or equity risk premium questions all route here. The assessment gathers the capital structure at market values (market value of equity, market value of debt or book value as a stated proxy, preferred stock where it exists), the CAPM inputs (risk-free rate, beta raw or to be unlevered and relevered, equity risk premium), and the cost of debt (pre-tax yield to maturity or marginal borrowing rate, and the marginal tax rate). The framework runs in priority order: data collection, cost of equity by CAPM, after-tax cost of debt, weighting at market values, never book values, then the final computation with sensitivity. The formula blends the three sources: equity weight times cost of equity, plus debt weight times after-tax cost of debt, plus preferred weight times its cost where present. The technical steps handle the hard parts openly: unlevering a peer group's beta and relevering it to the target's own debt to equity ratio for private companies or odd capital structures, using the Hamada relationship, and estimating the market value of debt with book value as a proxy or a synthetic rating from the interest coverage ratio when market prices are unavailable. The output is a WACC memo with a summary table (final WACC and the weights), component detail for every CAPM input and the tax adjustment, and a sensitivity matrix across beta and equity risk premium assumptions, shipped with a memo template and beta workpaper. From the GAJETOso/financeskills repository (MIT). Honest caveats: the answer inherits the quality of the market inputs you supply, beta and the equity risk premium most of all, and the sensitivity matrix exists precisely because reasonable people land on different WACCs from the same company. Skill Harbor never reviews the code, review it yourself before use.