FAST WACC Formula

Matthew Tambiah ()
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Matthew Tambiah: SEAS - Harvard John A. Paulson School of Engineering and Applied Sciences - Harvard University

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Abstract: The Weighted Average Cost of Capital (WACC) is a very common metric used in Finance. Most resources that discuss the WACC teach a method for calculating the WACC that requires multiple steps and calculating several intermediate values. This paper presents the Fast WACC Formula (or algorithm) for calculating the WACC that can be used under certain conditions and which requires fewer calculation steps, requires calculating fewer intermediate values, and is less computationally complex than the most commonly published methods for calculating the WACC and is therefore more efficient than most published methods. The Fast WACC Formula can be used if one uses the Harris-Pringle equation to calculate the leveraged return on Equity and one uses the CAPM model for asset pricing. If these do not apply, then the Fast WACC Formula does not apply.

Date: 2021-04-04
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