Apple Inc. (AAPL) Weighted Average Cost of Capital (WACC)

Apple Inc.

AAPL (NASDAQ)

(%)

Models
Apple Inc. Weighted Average Cost of Capital (WACC)

# Render description block
model.render_description({
    "data": r"""
## Weighted Average Cost of Capital (WACC)

WACC is a financial metric that helps in calculating a firm’s cost of financing by combining the cost of debt and cost of equity structure together.

`WACC` = `Equity Weight` * `Cost of Equity` + `Debt Weight` * `Cost of Debt` * (1 - `Tax Rate`)

> Read more: [Understanding WACC](https://www.investopedia.com/terms/w/wacc.asp)

> This model is a simplified version of Prof. Aswath Damodaran's spreadsheet [⬇️wacccalc.xls](https://pages.stern.nyu.edu/~adamodar/pc/wacccalc.xls)
""",
    "properties": {
        "width": "responsive"
    }
})

# --- Assumptions
assumptions.set({
    "timeseries": "annual",
    "data": {
        "#beta": """
            profile:beta
        """,
        "%riskFreeRate": """
            treasury:year10
        """,
        "%equityRiskPremium": """
            risk:totalEquityRiskPremium
        """,
        "%taxRate": """
            income:incomeTaxExpense / income:incomeBeforeTax 
            or if this <= 0:
            risk:corporateTaxRate
        """,
    },
    "titles": {
        "#beta": "Beta",
        "%riskFreeRate": "Risk Free Rate",
        "%equityRiskPremium": "Equity Risk Premium",
        "%taxRate": "Tax Rate",
    },
    "properties": {
        "width": "responsive",
        "title": "Assumptions",
        "id": "component-2",
        "bindTo": None
    },
    "descriptions": {
        "#beta": r"""
Beta measures the volatility of a stock's price in relation to the overall stock market. A higher beta indicates greater price fluctuations relative to the market.
        """,
        "%riskFreeRate": r"""
The risk-free rate represents the return an investor expects from an absolutely risk-free investment over a specified time period. By default, it is set to the current yield of the U.S. 10-Year Treasury Bond.
        """,
        "%equityRiskPremium": r"""
The market risk premium represents the additional return over the risk-free rate that investors expect for taking on the risks associated with equities.
        """,
        "%taxRate": r"""
`Tax Rate` = `Income Tax Expense` / `Income Before Tax`

This is the company’s **effective tax rate**, reflecting the average rate of tax actually paid on its pre-tax earnings (including all statutory, deferred, and non-recurring items).

This rate is used to adjust the after-tax cost of debt, since interest expense is tax-deductible.

## Discount Rate

`Discount Rate` =  
`Debt Weight` × `Cost of Debt` × (1 − `Tax Rate`)  
+ `Equity Weight` × `Cost of Equity`
        """,
    }
})

# --- Weights Calculations
data.compute_results({
    "%costOfDebt": """
        income:interestExpense / balance:totalDebt
    """,
    "marketCapitalizationTotalDebt": """
        profile:mktCap + balance:totalDebt
    """,
    "%equityWeight": """
        profile:mktCap / (profile:mktCap + balance:totalDebt)
    """,
    "%debtWeight": """
        1 - result:%equityWeight
    """,
}, timeseries="annual")

model.render_results({
    "timeseries": "annual",
    "data": {
        "income:interestExpense": {
            "label": "Interest Expense",
            "type": "$"
        },
        "balance:totalDebt": {
            "label": "/ Total Debt",
            "type": "$"
        },
        "result:%costOfDebt": {
            "label": "= Cost of Debt",
            "type": "%"
        },
        "profile:mktCap": {
            "label": "Market Capitalization",
            "type": "$"
        },
        "result:marketCapitalizationTotalDebt": {
            "label": "/ (Market Capitalization + Total Debt)",
            "type": "$"
        },
        "result:%equityWeight": {
            "label": "= Equity Weight",
            "type": "%"
        },
        "result:%debtWeight": {
            "label": "(1 - Equity Weight) = Debt Weight",
            "type": "%"
        },
    },
    "properties": {
        "title": "Weights Calculations",
        "width": "responsive",
        "hidden_keys": []
    }
})

# --- WACC Calculation
data.compute_results({
    "%costOfEquity": """
        assumption:%riskFreeRate +  assumption:#beta *  assumption:%equityRiskPremium
    """,
    "%costOfDebt": """
        income:interestExpense /  balance:totalDebt
    """,
    "%debtWeight": """
        balance:totalDebt / (profile:mktCap +  balance:totalDebt)
    """,
    "%equityWeight": """
        1 -  result:%debtWeight
    """,
    "%1TaxRate": """
        1 - assumption:%taxRate
    """,
    "%wacc": """
        result:%debtWeight *  result:%costOfDebt * (1 - assumption:%taxRate) +  result:%equityWeight* result:%costOfEquity
    """,
}, timeseries="annual")

model.render_results({
    "timeseries": "annual",
    "data": {
        "assumption:#beta": {
            "label": "Beta",
            "type": ""
        },
        "assumption:%equityRiskPremium": {
            "label": "* Equity Risk Premium",
            "type": "%"
        },
        "assumption:%riskFreeRate": {
            "label": "+ Risk Free Rate",
            "type": "%"
        },
        "result:%costOfEquity": {
            "label": "= Cost of Equity",
            "type": "%"
        },
        "result:%equityWeight": {
            "label": "* Equity Weight",
            "type": "%"
        },
        "result:%costOfDebt": {
            "label": "+ Cost of Debt",
            "type": "%"
        },
        "result:%debtWeight": {
            "label": "* Debt Weight",
            "type": "%"
        },
        "result:%1TaxRate": {
            "label": "* (1 - Tax Rate)",
            "type": "%"
        },
        "result:%wacc": {
            "label": "= WACC (Discount Rate)",
            "type": "%"
        },
    },
    "properties": {
        "title": "WACC Calculation",
        "width": "responsive",
        "hidden_keys": []
    }
})

# --- Weighted Average Cost of Capital
model.set_final_value({
    "value": data.get("""
        result:%wacc
    """, timeseries="annual"),
    "units": "%",
    "title": "Weighted Average Cost of Capital",
    "properties": {
        "width": "full" 
    }
})

Weighted Average Cost of Capital

%

* Values are not guaranteed, please do your own
research before making investment decisions.

Weighted Average Cost of Capital (WACC)

WACC is a financial metric that helps in calculating a firm’s cost of financing by combining the cost of debt and cost of equity structure together.

WACC = Equity Weight * Cost of Equity + Debt Weight * Cost of Debt * (1 - Tax Rate)

Read more: Understanding WACC

This model is a simplified version of Prof. Aswath Damodaran's spreadsheet ⬇️wacccalc.xls

Assumptions

Beta Beta Beta measures the volatility of a stock's price in relation to the overall stock market. A higher beta indicates greater price fluctuations relative to the market.	#
Risk Free Rate Risk Free Rate The risk-free rate represents the return an investor expects from an absolutely risk-free investment over a specified time period. By default, it is set to the current yield of the U.S. 10-Year Treasury Bond.	%
Equity Risk Premium Equity Risk Premium The market risk premium represents the additional return over the risk-free rate that investors expect for taking on the risks associated with equities.	%
Tax Rate Tax Rate `Tax Rate` = `Income Tax Expense` / `Income Before Tax` This is the company’s effective tax rate, reflecting the average rate of tax actually paid on its pre-tax earnings (including all statutory, deferred, and non-recurring items). This rate is used to adjust the after-tax cost of debt, since interest expense is tax-deductible. Discount Rate `Discount Rate` = `Debt Weight` × `Cost of Debt` × (1 − `Tax Rate`) + `Equity Weight` × `Cost of Equity`	%

Weights Calculations
Interest Expense	0 USD
/ Total Debt	90.51 Bil. USD
= Cost of Debt	0%
Market Capitalization	3,784 Bil. USD
/ (Market Capitalization + Total Debt)	3,875 Bil. USD
= Equity Weight	97.66%
(1 - Equity Weight) = Debt Weight	2.34%

WACC Calculation
Beta	1.12
* Equity Risk Premium	4.46%
+ Risk Free Rate	4.15%
= Cost of Equity	9.13%
* Equity Weight	97.66%
+ Cost of Debt	0%
* Debt Weight	2.34%
* (1 - Tax Rate)	83.44%
= WACC (Discount Rate)	8.91%

Weighted Average Cost of Capital

%

Weighted Average Cost of Capital (WACC)

Assumptions

Beta

Risk Free Rate

Equity Risk Premium

Tax Rate

Discount Rate

Weights Calculations

WACC Calculation

Discounted Cash Flow to Firm - Perpetual Growth

Earnings Power Value

Simple Dividend Discount Model

Simple Excess Return Model

Two-Stage Dividend Discount Model

Two-Stage Excess Return Model

Discounted Cash Flow to Firm - Exit Multiple

Discounted Future Market Cap

Peter Lynch Fair Value

Altman Z-Score

Beneish M-Score

Capital Asset Pricing Model (CAPM)

Margin Analysis

Piotroski F-Score

Return on Invested Capital (ROIC)

Shiller PE (CAPE) Ratio

Weighted Average Cost of Capital (WACC)

Market is Open

After-Hours Quote

Market is Open

After-Hours Quote

Apple Inc. Weighted Average Cost of Capital (WACC)

Weighted Average Cost of Capital

%

Weighted Average Cost of Capital (WACC)

Assumptions

Beta

Risk Free Rate

Equity Risk Premium

Tax Rate

Discount Rate

Weights Calculations

WACC Calculation

Discounted Cash Flow to Firm - Perpetual Growth

Earnings Power Value

Simple Dividend Discount Model

Simple Excess Return Model

Two-Stage Dividend Discount Model

Two-Stage Excess Return Model

Discounted Cash Flow to Firm - Exit Multiple

Discounted Future Market Cap

Peter Lynch Fair Value

Altman Z-Score

Beneish M-Score

Capital Asset Pricing Model (CAPM)

Margin Analysis

Piotroski F-Score

Return on Invested Capital (ROIC)

Shiller PE (CAPE) Ratio

Weighted Average Cost of Capital (WACC)