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URL: https://boards.fool.com/jmviap-wrote-i-was-wondering-how-you-find-out-12113998.aspx
Subject: Re: EVA Economic Value Added	Date: 3/3/2000 8:12 AM
Author: swallen1	Number: 5694 of 8329
jmviap wrote: I was wondering how you find out what the cost of capital is for a corporation. I know we can find out how much their cost of debt is by looking at the bonds a company has outstanding and their rate of return, however how does one find out or calculate the cost of equity capital to then determine the cost of capital for a firm. JV- The weighted average cost of capital (WACC) for a company is calculated as follows: (Cost of Debt)(1-T)(D/A) + (Cost of equity)*(E/A) where: Cost of Debt = Weighted average of all outstanding debt T = Tax Rate D/A = ratio of debt to assets Cost of Equity = Return on Equity (5 year appreciation + dividends is a good approximation) E/A = ratio of equity to assets That being said, its interesting to note that many companies use a benchmark, or desired rate for EVA calculation instead of the actual rate. For instance, Coca-Cola uses 12% as its worldwide WACC. Why? Its 1% per month. Simpler is better. Steve (Simple Simon)
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