In this post, we are going to learn how to build a model to calculate a firm weighted average cost of capital (WACC) with Python. We will learn what is WACC and how to calculate it step by step. Then, in a future post, we will apply WACC to estimate the value of a company using the Discounted Cash Flow method.

What is the Weighted Average Cost of Capital (WACC)?

The WACC is a firm cost of capital. Is the capital rate that a firm is expected to pay on average to all its security holders. As we will see in the formula of next section, the WACC uses cost of debt, cost of equity, capital structure of a firm and tax rate.

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