WACC
WACC (Weighted Average Cost of Capital) is the blended cost of debt and equity financing, weighted by their proportions in the capital structure, used as the discount rate for DCF analysis.
| WACC Formula | Components |
| WACC | (E/V times Re) plus (D/V times Rd times (1 minus Tc)) |
| E/V | Equity as percentage of total value |
| Re | Cost of equity (required return on equity) |
| D/V | Debt as percentage of total value |
| Rd | Cost of debt (interest rate) |
| Tc | Corporate tax rate (0% for UAE individuals) |
| Example Calculation | Values |
| Property value | AED 1,500,000 |
| Equity | AED 375,000 (25%) |
| Debt | AED 1,125,000 (75%) |
| Cost of equity | 12% |
| Cost of debt | 5.5% |
| WACC | (0.25 times 12%) plus (0.75 times 5.5%) = 7.125% |
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