Example of WACC calculation for IT project in USA
12/02/2020
Example of WACC calculation
Sector: IT project (example: software application development)
Location of project: United States
Currency of investment: USD
IndicatorSource of information2019
Corporate tax rate of United Stateshttps://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-corporate-tax-rates.pdf21.0%
Cost of Equity
Risk-free rate in USDhttp://pages.stern.nyu.edu/~adamodar/2.97%
Equity risk premiumhttp://pages.stern.nyu.edu/~adamodar/5.20%
Unlevered betahttp://pages.stern.nyu.edu/~adamodar/1.12
Debt/Equityhttp://pages.stern.nyu.edu/~adamodar/0.10
Relevered beta = Unlevered beta * (1+(1-Corporate tax rate) * Debt/Equity)1.21
Specific riskAssumption10.0%
Cost of Equity in USD19.3%
Cost of Debt in USD
Cost of DebtAssumption12.0%
After-tax cost of debt = Cost of Debt * (1 - Tax rate)9.5%
Capital structure
Weight of equity as % of capital = 1 - Weight of debt as % of capital90.9%
Weight of debt as % of capital = Debt/Equity / (1 + Debt/Equity )9.1%
WACC in USD = Weight of equity as % of capital * Cost of Equity in USD + Weight of debt as % of capital * After-tax cost of debt18.4%