### Learning

#### Weighted Average Cost of Capital (WACC)

WACC is the company's overall cost of capital, considering the weighted costs of equity and debt:

$ \text{WACC} = \left(\frac{\text{E}}{\text{V}}\right) \times \text{CE} + \left(\frac{\text{D}}{\text{V}}\right) \times \text{CDAT} \times (1 - \text{Tax Rate}) $

**E:**Market value of equity.**D:**Market value of debt.**V:**Total financing value (E + D).**CE:**Cost of equity.**CDAT:**Cost of debt after tax.**Tax Rate:**Corporate tax rate.

#### Cost of Debt After Tax (CDAT)

The Cost of Debt After Tax considers the tax shield due to interest payments being tax-deductible. The formula is:

$ \text{CDAT} = \text{Cost of Debt Before Tax} \times (1 - \text{Tax Rate}) $

**Cost of Debt Before Tax:**The interest rate paid on the debt.**Tax Rate:**The company's marginal tax rate.

#### Cost of Equity (CE)

The Cost of Equity is the return that investors expect for bearing the risk of owning equity. The Capital Asset Pricing Model (CAPM) is often used:

$ \text{CE} = \text{Risk-Free Rate} + \beta \times (\text{Market Risk Premium}) + \text{Other Risk Premium} $

**Risk-Free Rate:**The yield on risk-free securities (e.g., government bonds).**Beta:**A measure of stock volatility compared to the market.**Market Risk Premium:**The expected return of the market minus the risk-free rate.**Other Risk Premium:**Additional risk premium for other risks (e.g., country risk, small company risk).