Scribd
Upload
43 views2 pages

Accor Q2

This document calculates the weighted average cost of capital (WACC) for EnCana using the standard WACC formula. It provides the calculations for the five inputs needed: total debt of $8054, total equity of $16007, tax rate of 30.81%, cost of debt of 6.5%, and cost of equity of 16.519%. Plugging these values into the WACC formula results in a WACC of 12.4936% for EnCana.

Uploaded by

Dahagam Saumith
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
43 views2 pages

Accor Q2

This document calculates the weighted average cost of capital (WACC) for EnCana using the standard WACC formula. It provides the calculations for the five inputs needed: total debt of $8054, total equity of $16007, tax rate of 30.81%, cost of debt of 6.5%, and cost of equity of 16.519%. Plugging these values into the WACC formula results in a WACC of 12.4936% for EnCana.

Uploaded by

Dahagam Saumith
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

We need to calculate cost of capital (WACC) for the company EnCana.

The formula for weighted


average cost of capital is given below.
𝐸 𝐷
𝑊𝐴𝐶𝐶 = 𝐾𝑒 ( ) + 𝐾𝑑 ( )(1 − 𝑡)
𝐷+𝐸 𝐷+𝐸
To calculate cost of capital we need five unknowns mentioned in above formula

1. Total Debt = D
2. Total Equity = E
3. Tax Rate = t
4. Cost of Debt = 𝐾𝑑
5. Cost of Equity = 𝐾𝑒

Calculations:
1. Total Debt (D) = 5278 + 1278 + 1425 + 73

= 8054

2. Total Equity (E) = 5264 + 10743


= 16007

𝐷 8054
= = 0.3347
𝐷+𝐸 8054 + 16007

𝐸 16007
= = 0.6652
𝐷+𝐸 8054 + 16007

1260
3. Tax Rate (t) =
4089

= 0.3081

𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒
4. Cost of Debt (𝐾𝑑 ) =
𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡
524
=
8054
= 6.5%

5. Cost of Equity (𝐾𝑒 ) = 𝑅𝑓 + 𝛽 (𝑅𝑚 − 𝑅𝑓 )

𝑅𝑓 = Long term government bond rate = 4.2%


Β = 1.27
𝑅𝑚 = Arthmatic Average Market return = 13.9%

𝐾𝑒 = 4.2 + 1.27 (13.9 − 4.2)

= 16.519%
𝐸 𝐷
𝑊𝐴𝐶𝐶 = 𝐾𝑒 ( ) + 𝐾𝑑 ( )(1 − 𝑡)
𝐷+𝐸 𝐷+𝐸
𝑊𝐴𝐶𝐶 = 16.519 (0.6652) + 6.5 (0.3347)(1 − 0.3081)

𝑊𝐴𝐶𝐶 = 10.9884 + 1.5052


𝑊𝐴𝐶𝐶 = 12.4936%

You might also like