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