WEIGHTED AVERAGE COST OF CAPITAL 1. FIND MARKET WEIGHT OF DEBT AND EQUITY FOR YOUR COMPANY 2. FIND THE REQUIRED RETURN OF BONDS. REMEMBER IN EQUILIBRIUM THE REQUIRED RETURN SHOULD EQUAL THE YIELD TO MATURITY. a. EXCLUDE ALL BONDS WITH LESS THAN 2-YEAR MATURITY b. 3. FIND THE TAX RATE FOR THE FIRM 4. FIND THE REQUIRED RETURN FOR EQUITY (all 3 approaches must be calculated) a. BOND PLUS APPROACH (USE A PREMIUM OF 5%* b. CAPM APPROACH i. AS A PROXY FOR MARKET RETURN, USE THE RETURN FOR SP500 FROM MONTH OF BIRTH UNTIL April 2024 c. DDM APPROACH (company MUST pay a dividend) d. Average the answer from the three approaches. 5. IF FIRM HAS PREFERRED STOCK, FIND ITS REQUIRED RETURN 6. CALCULATE THE WACC FOR YOUR FIRM et Valk of equity/Total marchet veil