Debt and Equity Weightings in WACC

Business Valuation UpdateVol. 5 No. 3
Data and Publications Update
March 1999
cost of capital
weighted average cost of capital (WACC), fair market value (FMV), cost of debt

Summary

Evans introduces the formula below to simplify the iteration process when employing the single period capitalization method. The formula solves for the fair market value of equity based on independent factors that are generally known in advance by the valuation professional.