Figure: 34 TAC §9.4031(j)(6)(A)
Wtd Avg. Cost of Equity = (Cost of equity percentage) × (Equity fraction)
Wtd Avg. Cost of Debt = (Cost of debt percentage) × (Debt fraction)
WACC = Wtd Avg. Cost of Equity + Wtd Avg. Cost of Debt
The WACC can also be described as follows:
INFLATION RATE
+ RISK FREE COMPONENT
= RISK FREE RATE
RISK FREE RATE
+ GENERAL RISK PREMIUM
= WEIGHTED AVERAGE COST OF CAPITAL