| 1. Calculate cost of debt |
| | | | 2015 | 2014 | 2013 |
| current portion long term debt | | | 224,000 | 316,000 | 239,000 |
| long term debt | | | 107,000 | 119,000 | 237,000 |
| Total debt | | | 331,000 | 435,000 | 476,000 |
| Interest expense | | | 31,000 | 84,000 | 50,000 |
| Cost of debt | | | 0.0936555891 | 0.1931034483 | 0.1050420168 |
| Average cost of debt | | | 0.1306003514 |
| 2.Calculate the weight of Debt and Equity |
| Market value of Equity |
| Balance sheet value of Debt |
| Price | | 104.66 |
| shares outstannding | | 2340000 |
| Value of Debt | | 414,000 |
| Tatol D+E | | 245318400 |
| Wd | | 0.0016876027 |
| We | | 0.9983123973 |
| 3. Calculate corporate tax |
| | | | 2015 | 2014 | 2013 |
| Income before tax | | | 6194 | 4910 | 2754 |
| Tax expense | | | 2506 | 1970 | 1254 |
| Income tax rate | | | 0.4045850823 | 0.4012219959 | 0.4553376906 |
| Average income tax rate | | | 0.4203815896 |
| 4. Calculate cost of Equity |
| Rm(project 2) Average of S&P 500 Return | | | | 10.73% |
| Rf | | | | 3.23% |
| Beta (Project 2) | | | | 0.61 |
| Cost of Equity =(Rm-Rf)* Beta+Rf | | | | 7.80500% |
| WACC=Wd*Rd*(1-tax rate)+We*Re | | | | 0.0780460314 |
Emmaa LEE
wacc.xls
