[Verse 1] When companies need capital flow Three sources make the money grow Debt holders lend at interest rates Preferred shares pay dividends that never wait Common equity holders take the biggest chance But WACC weighs them all in finance [Chorus] WACC - Weighted Average Cost of Capital Debt after-tax, preferred, equity factorial Cost of equity - CAPM's your friend Beta times market premium to the end Dividend discount or bond yield plus Calculate the rate that funds your business [Verse 2] Cost of debt gets taxed away Multiply by one minus the rate you pay Preferred stock dividends never cease Divide by market price for cost release But equity's trickier to define Three methods help you draw the line [Chorus] WACC - Weighted Average Cost of Capital Debt after-tax, preferred, equity factorial Cost of equity - CAPM's your friend Beta times market premium to the end Dividend discount or bond yield plus Calculate the rate that funds your business [Verse 3] Beta measures systematic risk Regression slopes or pure-play tricks Unlever betas, strip out debt Then lever up for what you'll get When markets crash, does your stock fall? Beta answers once and for all [Bridge] Emerging markets need extra care Country risk premiums hanging in the air Marginal costs curve upward bound As cheaper capital can't be found Flotation costs eat into proceeds Adjust your calculations for what finance needs [Chorus] WACC - Weighted Average Cost of Capital Debt after-tax, preferred, equity factorial Cost of equity - CAPM's your friend Beta times market premium to the end Dividend discount or bond yield plus Calculate the rate that funds your business [Outro] From risk-free rates to market swings WACC captures financing's strings Weight each source by market value Calculate the cost that's truly due
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