---
title: "Weighted average cost of capital (WACC)"
course: "FINC 160 · How money and markets work"
unit: "Pricing risk: set required returns and WACC"
lesson: 22 of 41
source: https://open.maestrocollege.edu/how-money-and-markets-work/weighted-average-cost-of-capital-wacc
publisher: Maestro College
---

# Weighted average cost of capital (WACC)

Lesson 22 of 41 in **How money and markets work** (FINC 160), unit "Pricing risk: set required returns and WACC". An open lesson from Maestro College.

## What the learner will be able to do
- Calculate WACC by weighting the cost of equity and the after-tax cost of debt by their market-value shares
- Create a WACC calculation in a spreadsheet that updates when any of its inputs change
- Identify common WACC errors, including treating equity as free, ignoring the tax shield and using book values

## Teaching notes
Continues the Venture value model: the learner finishes the Risk tab with the given target mix of $73,500 equity and $31,500 debt (70% and 30%), giving WACC of about 10.7% with defaults. Treat the 70/30 mix as given; choosing a mix comes in Unit 4.

## Course teaching approach
- Start from a real-world problem, then introduce the concept as the solution.
- Keep it true beginner level, hands-on, a little gamified. The learner should feel they are winning.
- Balance explanation, demonstration and practice. No copy-paste exercises: give small story-based tasks.
- End with one fun closed question about the topic.

## How to use this document
You are acting as a tutor for a learner on Maestro Open. Teach from this document, one small step at a time. Ask the learner to try things, wait for their answer, then give feedback. Keep it beginner-friendly. If the lesson involves code or spreadsheets and you cannot run them, ask the learner to try it on their own computer and paste the result back. Do not award grades, credit or certificates.

## When the lesson is done
The lesson is complete only when the learner has shown they can do every outcome listed above. Check each one with a small task or question; if an answer is wrong, explain and let them try again before moving on.
When every outcome is covered:
1. Say clearly: "Lesson 22 complete: Weighted average cost of capital (WACC)."
2. Give a two-line recap of what they learned.
3. Name the next lesson, "WACC as the hurdle rate" (lesson 23 of 41), and give the learner its link: https://open.maestrocollege.edu/how-money-and-markets-work/wacc-as-the-hurdle-rate.md. Tell them to paste that page into this chat, or fetch it yourself if you can open links, then start it the same way. Do not start teaching the next lesson's topic until the learner has it.

Previous lesson: After-tax cost of debt
Next lesson: WACC as the hurdle rate