WACC - Excel by garrickWilliams

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									Life Time Fitness
An example of the calculation of the weighted-average cost of capital

           Cost of Equity                                           Amount of Equity
                      Riskfree rate              5.10%                        Shares
                      Beta                         0.95                       Price
                      Market return              10.6%                        Value
                      Cost of Equity            10.33%

           Cost of Debt                                             Amount of Debt
                      Rate                       6.85%                        Book value
                      Taxrate                      35%                        Adjustment
                      Cost of Debt               4.45%                        Value

                                                                    Total Capital

           WACC                                  8.93%
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Life Time Fitness
An example of the calculation of the weighted-average cost of capital

           Cost of Equity                                               Amount of Equity
                      Riskfree rate              5.10%                            Shares
                      Beta                         1.10                           Price
                      Market return              10.6%                            Value
                      Cost of Equity            11.14%

           Cost of Debt                                                 Amount of Debt
                      Rate                        7.35%                           Book value
                      Taxrate                       35%                           Adjustment
                      Cost of Debt                4.78%                           Value

                                                                        Total Capital

           WACC                                   8.76%

           New cost of debt (spread)              1.75%
           Old beta                                 0.95
           Old D/E                                  0.31
           Unlevered beta                           0.79 Bu=Bl/(1+D/E(1-T))
           New D/E                                  0.60
           New levered beta                         1.10 Bl=Bu(1+D/E(1-T))
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