The standard method for determining WACC involves weighting the individual costs of each capital component—primarily equity and debt—by their respective proportions in the firm's total market value.
WACC=(EV×Re)+(DV×Rd×(1−Tc))WACC equals open paren the fraction with numerator cap E and denominator cap V end-fraction cross cap R sub e close paren plus open paren the fraction with numerator cap D and denominator cap V end-fraction cross cap R sub d cross open paren 1 minus cap T sub c close paren close paren Review of method for determining the WACC
The is the definitive benchmark for determining a company's blended cost of financing. Acting as the "hurdle rate," it represents the minimum return a business must generate to satisfy both its equity shareholders and debt lenders. The WACC Framework The standard method for determining WACC involves weighting