Capital Structure Calculator

Analyze a firm's capital structure and calculate weighted average cost of capital (WACC).

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Calculate Capital Structure

Enter financial details to compute the weights of equity and debt, cost of capital, and WACC.

Capital Structure Formulas

Equity Weight = Market Cap / (Market Cap + Net Debt)

Debt Weight = Net Debt / (Market Cap + Net Debt)

Cost of Equity = Risk-Free Rate + Beta × (Market Return - Risk-Free Rate)

Cost of Debt = Interest Rate × (1 - Tax Rate)

WACC = (Equity Weight × Cost of Equity) + (Debt Weight × Cost of Debt)

Where Net Debt = Total Debt - Cash and Equivalents

Choose to input market capitalization directly or calculate it from share price and outstanding shares.
The total market value of the firm's equity (share price × outstanding shares). Find in financial reports or stock market data.
The firm's total debt from financial statements. Include all loans and bonds.
The firm's liquid assets (e.g., cash, marketable securities). Optional; defaults to 0.
The return on a risk-free asset, typically government bonds (e.g., 10-year treasury yield). Check central bank data or financial websites.
The stock's volatility relative to the market. Obtain from financial data providers like Yahoo Finance or Bloomberg.
The expected market return, often based on historical index performance (e.g., S&P 500). Use historical data or analyst estimates.
The weighted average interest rate on the firm's debt. Find in financial statements, bond yields (e.g., YTM on bonds), or estimate based on industry benchmarks (e.g., 20-45% in high-rate markets like Ghana).
The corporate tax rate applicable to the firm. Check financial statements or use the statutory rate for the country (e.g., 30% for many jurisdictions).
How to Find Input Values

Guide to Finding Input Values

  • Market Capitalization: Find on stock exchanges, financial websites (e.g., Yahoo Finance), or calculate as Share Price × Outstanding Shares.
  • Share Price: Check current stock price on exchanges or financial platforms like Bloomberg or Google Finance.
  • Outstanding Shares: Available in the company's financial statements or investor relations page.
  • Total Debt: Sum of all short-term and long-term debt from the balance sheet in financial statements.
  • Cash and Equivalents: Found in the balance sheet under current assets (e.g., cash, marketable securities).
  • Risk-Free Rate: Use the yield on government bonds (e.g., 10-year treasury yield) from central bank websites or financial news.
  • Beta: Obtain from financial data providers like Yahoo Finance, Bloomberg, or Reuters.
  • Market Return: Use historical market index returns (e.g., S&P 500) or analyst estimates, typically 8-12%.
  • Interest Rate on Debt: Find in financial statements (debt schedule), bond yields (YTM), or estimate using industry benchmarks (e.g., 20-45% in high-rate markets like Ghana).
  • Tax Rate: Use the corporate tax rate from financial statements or the statutory rate for the firm's country.

Understanding Capital Structure

Capital structure represents how a firm finances its operations through equity and debt. The Weighted Average Cost of Capital (WACC) reflects the blended cost of these financing sources.

Equity-Heavy

Equity Weight > 70%

The firm relies more on equity, indicating lower financial risk but potentially higher cost of capital.

Balanced

30% ≤ Debt Weight ≤ 70%

The firm balances equity and debt, optimizing cost of capital and risk.

Debt-Heavy

Debt Weight > 70%

The firm relies heavily on debt, indicating higher financial risk but potentially lower cost of capital due to tax shields.

How to Use the Capital Structure Calculator

  1. Select Input Method

    Choose to input market capitalization directly or calculate it from share price and outstanding shares.

  2. Enter Market Capitalization or Share Details

    Provide the market capitalization or the current share price and number of outstanding shares.

  3. Input Total Debt

    Enter the firm's total debt from the latest financial statements.

  4. Provide Cash and Equivalents

    Optionally input cash and equivalents to calculate net debt. Defaults to 0 if not provided.

  5. Enter Cost Parameters

    Provide risk-free rate, beta, market return, interest rate, and tax rate for cost of equity and debt calculations.

  6. Calculate and Interpret

    Click “Calculate” to compute the equity and debt weights, costs, and WACC. Review the results and chart to assess the firm's financial structure.

Key Applications of Capital Structure Analysis

  • Evaluating financial risk and leverage
  • Calculating WACC for valuation and investment decisions
  • Comparing capital structures across firms
  • Informing financing decisions
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