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Understanding Weighted Average Cost of Capital (WACC)Conversely, a lower WACC signals relatively low financing cost and less risk. "The formula uses the cost of each of the sources of capital and weighs them relevant to the market value of the ...
The WACC equation uses the expected value calculated from the CAPM as the cost of equity. The company value is divided by the number of shares outstanding to arrive at the fair value of the stock.
Esty, Benjamin C., and E. Scott Mayfield. "The Weighted Average Cost of Capital (WACC): Derivation, Intuition, and Applications." Harvard Business School Technical Note 221-106, June 2021.
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