L10 WACC

Replicate the book case of WACC

We will use the 2024 financial statements data of Microsoft from Yahoo Finance to derive its WACC.

Total debt in 2024 = 243,686,000

Total equityy in 2024 = 268,477,000

Total debt and equity = 512,163,000

Weight of equity = 268,477,000 / 512,163,000 = 0.524

Weight of debt = 243,686,000 / 512,163,000 = 0.476

As the 10 year US treasury yield is 3%, we assume a risk free rate of 3%

We assume that the expected market return is 8%

Beta of Microsoft is 0.87

Cost of equity = 3 + 0.87 (8-3) = 7.35%

According to Finbox, Cost of debt (post-tax) = 4.8%

WACC of Microsoft = 0.524x0.0735 + 0.476x0.048 = 6.17%