[Verse 1] When companies need funding for their dreams to come alive They blend debt and equity to help their business thrive The weighted average tells us what this mixture really costs WACC shows the hurdle rate, without it we'd be lost [Chorus] Cost of capital, capital, shows us what we pay Debt times one minus tax rate, that's the cheaper way Preferred stock dividend over market price so clean Cost of equity's the hardest, three methods to be seen WACC, WACC, weight them all together Guide our investment choices, now and forever [Verse 2] CAPM starts with risk-free rate, then adds the market's call Beta times the risk premium, the fairest price of all Dividend discount model grows those payments through the years Bond yield plus a premium when comparison appears [Chorus] Cost of capital, capital, shows us what we pay Debt times one minus tax rate, that's the cheaper way Preferred stock dividend over market price so clean Cost of equity's the hardest, three methods to be seen WACC, WACC, weight them all together Guide our investment choices, now and forever [Verse 3] Beta measures systematic risk through regression's line Pure-play method finds a match when data's hard to find Lever up or unlever down to match the debt you hold Country risk for emerging markets, premiums unfold [Bridge] Marginal cost rises as we need more cash to spend Flotation costs reduce proceeds that new issues send Each component weighted by its portion of the whole Cost of capital guides us toward our financial goal [Chorus] Cost of capital, capital, shows us what we pay Debt times one minus tax rate, that's the cheaper way Preferred stock dividend over market price so clean Cost of equity's the hardest, three methods to be seen WACC, WACC, weight them all together Guide our investment choices, now and forever [Outro] From debt to equity, weight them carefully WACC will show the way to profitability
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