3. What is WACC and how is it calculated? Specifically: How do you calculate the weights of each type of capital? What is preferred, calculations based on market values or book values? Why? How do you calculate the cost of capital for each type of capital? Should the calculations be based on the firm's historic or current situation? What is the Capital Asset Pricing Model (CAPM) and what is it used for? How is it calculated? Why is the cost of debt multiplied by (1 - corporate tax rate)? What is the corporate tax shield?

Answer rating: 100% (QA)

WACC stands for Weighted Average Cost of Capital which is a financial metric that calculates the cost of capital for a company by taking into account the weighted average of the costs of debt and equi... View the full answer