Python Exercises for Corporate Finance and Risk Management

20 / 26

Question: 96

In the previous question (95), What is the value of after-tax WACC, assuming that the company pays tax at a 35% rate?


Weighted average cost of capital (WACC) represents a firm’s average after-tax cost of capital from all sources, including common stock, preferred stock, bonds, and other forms of debt. WACC is the average rate that a company expects to pay to finance its assets.

  • Define a function with the name "WACC" which will take six arguments, Market value of the firm’s equity, Market value of the firm’s debt, Cost of equity, Cost of debt, Corporate tax rate.
  • The signature of the function should be like:

    def WACC(E, D, V,Re, Rd, Tc):

  • Use the following formula,

    WACC = (E/V)Re)+((D/V)Rd*(1-Tc)


    E=Market value of the firm’s equity D=Market value of the firm’s debt V=E+D Re=Cost of equity Rd=Cost of debt Tc=Corporate tax rate

Note - Having trouble with the assessment engine? Follow the steps listed here

Loading comments...