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Chapter 2

WACC calculation

Now we know how to determine the cost of capital, we can attempt the WACC
calculation in its entirety.

STEP (1) – For each different type of finance (redeemable debt, irredeemable debt,
equity) work out its proportion as a % of total finance using Market values,

STEP (2) – Determine the cost of each type of finance (as seen in section 2 & 3),

STEP (3) – (Results of step 1 × results of step 2) for each type of debt,

STEP (4) – Sum the totals of each result for step 3 = WACC.

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