[Verse 1]
Every company needs capital to grow and thrive
Mix of debt and equity keeps the business alive
But what's the true cost when you blend them together?
WACC will show you through any financial weather
Debt comes cheaper with its interest deduction
Tax shield benefit gives cost reduction
Equity's expensive, no tax break to claim
But mix them right and optimize the game
[Chorus]
WACC - Weighted Average Cost of Capital
Market values matter, not the book
After-tax cost of debt times its weight
Plus cost of equity, don't overlook
E over V plus D over V
Always adds up to one, you see
WACC shows the blended rate we pay
For every dollar invested today
[Verse 2]
Start with market values, not what's on the books
Current stock price times shares outstanding looks
At true equity value in the market's eyes
Add market debt value for the full enterprise
Weight of debt is D divided by V
Weight of equity is E over V
Where V equals D plus E combined
Market value weights keep you aligned
[Chorus]
WACC - Weighted Average Cost of Capital
Market values matter, not the book
After-tax cost of debt times its weight
Plus cost of equity, don't overlook
E over V plus D over V
Always adds up to one, you see
WACC shows the blended rate we pay
For every dollar invested today
[Bridge]
Tax rate times the cost of debt
Saves you money, don't forget
Interest payments reduce your tax
After-tax cost, those are the facts
Cost of equity's harder to find
CAPM model helps you define
Risk-free rate plus beta risk
Premium that investors won't dismiss
[Verse 3]
WACC becomes your hurdle rate
Projects above this threshold rate
Create value for the company
Below WACC destroys equity
Capital structure optimization
Find the mix for best calculation
Too much debt brings financial stress
Right balance brings WACC success
[Chorus]
WACC - Weighted Average Cost of Capital
Market values matter, not the book
After-tax cost of debt times its weight
Plus cost of equity, don't overlook
E over V plus D over V
Always adds up to one, you see
WACC shows the blended rate we pay
For every dollar invested today
[Outro]
When you're valuing the enterprise
WACC discount helps you analyze
Future cash flows to present day
WACC lights the financial way