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Catracho Catracho
wrote...
Posts: 529
Rep: 2 0
2 years ago
5.When operating your own business, it is wise to know your cost of capital and that of the industry. Identify the industry or sector that your (current or future) business belongs to,  find its cost of capital information using the following data sources:
 Cost of Capital by Sector_From a NYU Professor (this site has much more sectors included, but you may get lost if not familiar with some of the terms the professor used. The data he provided is also quite different from the sites below.  If you want to use this source, try to watch the 5-minute tutorial video made by the professor to gain a better understanding.)
WACC by Sector (to see the detailed information on a selected sector, select the name of the sector in the search box)... provide WACC summary of the sector. Correction: The comma used in the data is the decimal point. (For example, 0,30% should be 0.3%) Use decimal point rather than comma when copying the information onto your post.
WACC Expert  (this source may not have the most current information, but if your company is operated outside of the U.S.,  you might be able to find the cost of capital of a sector in a foreign country on this site)
6. Based on the information you provided in question 5, identify what is the major financing source for the sector that you selected, is it debt financing (i.e. loans or bond financing), or equity financing (via stock or venture capital financing)?



HERE THE LINKS
http://people.stern.nyu.edu/adamodar/New_Home_Page/datafile/wacc.html

https://pwc-tools.de/kapitalkosten/en/

http://www.waccexpert.com/
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wrote...
Educator
2 years ago
Hi Catracho

I went to the website http://www.waccexpert.com/ and picked a random sector (Retail) in the USA.

I got the following information back:





Quote
6. Based on the information you provided in question 5, identify what is the major financing source for the sector that you selected, is it debt financing (i.e. loans or bond financing), or equity financing (via stock or venture capital financing)?

Unsure how to interpret this. Can you send me the link to the 5 minute video?

If you want to use this source, try to watch the 5-minute tutorial video made by the professor to gain a better understanding.
Source  http://www.waccexpert.com/?country=1654&sector=148&detailledView=true
Catracho Author
wrote...
2 years ago
hi , here is the link to see the tutorial
wrote...
Educator
2 years ago
I just learned that the higher the WACC, the less likely the company is creating value because it has to overcome more expensive borrowing costs in order to make a profit. You're supposed to subtract the value of WACC by the companies return percentage to get a sense if the company is worth investing in.

E/V represents the proportion of equity-based financing, while D/V represents the proportion of debt-based financing.

Look at the Excel file given here: http://people.stern.nyu.edu/adamodar/New_Home_Page/datafile/wacc.html

E/V: E/(D+E) for Retail (Automotive) is 66.79%.
D/V: D/(D+E) for Retail (Automotive) is 33.21%.
Both add to 100%, as they should.

Because E/V is higher, it suggests higher proportion of equity-based financing vs. debt financing (i.e. loans or bond financing).
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