Weighted Average Book Value Formula

Wacc abbreviates for the average weighted cost of capital.

Weighted average book value formula. Formula to calculate weighted average weighted average is a type of an average that takes into account the relative importance of each value under consideration and is calculated by multiplying the respective weights in percentage terms with its corresponding value weighted average formula w1x1 w2x2 wnxn. Weighted average cost of capital formula 86 319 8 90133 8 x 7 50 3814 90133 8 x 2 72 x 1 0 329 weighted average cost of capital 7 26 limitations. Suppose your teacher says the test counts twice as much as the quiz and the final exam counts three times as much as the quiz.

X research source to find your weighted average simply multiply each number by its weight factor and then sum the resulting numbers up. Calculating weighted average by using the sum. To calculate a weighted average in excel simply use sumproduct and sum.

Re cost of equity rd cost of debt e market value of the firm s equity d market value of the firm s debt v e d total. Example 3 let s assume jagriti have invested money in stocks of different companies. In microsoft excel weighted average is calculated using the same approach but with far less effort because excel functions will do most of the work for you.

The wacc formula is calculated by dividing the market value of the firm s equity by the total market value of the company s equity and debt multiplied by the cost of equity multiplied by the market value of the company s debt by the total market value of the company s equity and debt multiplied by the cost of debt times 1 minus the corporate income tax rate. By using the weighted average formula we get weighted average w1 x1 w2 x2 wnxn. It represents the overall financing cost which accounts the cost of all existing financing resources in the business such as debt.

As you see a normal average grade 75 4 and weighted average 73 5 are different values. It assumes that there would be no change in the capital structure which isn t possible for all over the years and if there is any need to source more funds. Calculating weighted average in excel.

Wacc e v r e d v r d 1 t c where. First the average function below calculates the normal average of three scores.