What factors influence the Weighted Average Cost of Capital?

The Weighted Average Cost of Capital (WACC) is influenced by several factors. These include the cost of equity, the cost of debt, the risk-free rate, the market risk premium, the company's tax rate, and the company's debt-to-equity ratio. Additionally, the company's risk profile, as indicated by its unlevered beta, also plays a significant role. A higher unlevered beta indicates a more volatile and riskier company, which can increase the WACC.

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If you also want to compare your investment's performance against other opportunities, the WACC tab is the way to go. The Weighted Average Cost of Capital (WACC) tab represents the average rate a company should pay to finance its assets. At the center of WACC is the "unlevered beta". A higher unlevered beta means that a company is more volatile and riskier than the market average, while a lower unlevered beta means that a company is less risky.

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Capital Budgeting Spreadsheet

Are you looking to determine which investment opportunities are best for your company, especially when multiple options are available? How can you tel...

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