From the course: Excel for Corporate Finance Professionals
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Determine a discount rate - Microsoft Excel Tutorial
From the course: Excel for Corporate Finance Professionals
Determine a discount rate
- [Instructor] Once we've gone through and built a model to help us understand the expected changes in cash flow, we still need to go through and decide whether or not that particular investment might be worthwhile. To do this, we need to take into account our cost to capital. I'm in the 0503 Begin Excel file. Now, what we have here is our coffee robot model, and what we want to figure out is what the appropriate weighted average cost to capital would be in a case like this. Now, we've gone through and done this type of exercise previously, but I think it's important to understand how we would apply it in this kind of a context. So, our WACC here would simply be the weight of debt times our cost of debt times one minus the tax rate plus the weight of equity times the cost of equity. Now, from here, we would be able to go through and make adjustments to the equity values or the debt values in order to…
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