In this video, I break down WACC (Weighted Average Cost of Capital), the single number that determines whether a company’s investments create or destroy value. You’ll learn exactly what WACC means, how to calculate it using the full formula, and how companies use it as a hurdle rate for investment decisions. I walk through each component of the formula — cost of equity, cost of debt, and the tax shield — then plug in real numbers to calculate a complete WACC step by step. I compare real-world examples using Duke Energy and Tesla to show why different industries have wildly different WACCs, and I explain how WACC connects to DCF analysis as the discount rate. I also cover four critical pitfalls that trip up even experienced analysts, including why WACC involves circular logic. Whether you’re analyzing stocks, building DCF models, or studying corporate finance, this video gives you everything you need to understand the Weighted Average Cost of Capital.
Chapters:
0:00 – What is WACC?
0:20 – WACC Definition
0:46 – The WACC Formula Explained
1:02 – Breaking Down Each Component
1:36 – WACC Calculation Example
1:56 – How Companies Use WACC
2:32 – Real Example: Duke Energy vs Tesla
3:19 – Four WACC Pitfalls
4:20 – Key Takeaways
*Seeking Alpha Deals:*
💰 *Get $50 OFF Alpha Picks:* https://ryano.finance/alpha-picks
📈 *Get $159 OFF Seeking Alpha Premium and Alpha Picks Bundle:* https://ryano.finance/seeking-alpha-bundle
🔥 *Get $30 OFF Seeking Alpha Premium:* https://ryano.finance/seeking-alpha
🎓 *Get 25% Off CFA Courses (Featuring My Videos!) — Use code RYAN25 here:*
👉 https://ryano.finance/cfa
🎓 *Ivy League Certificate Programs by Wall Street Prep — Save up to $500 with codes RYAN or RYAN300:*
1. Columbia & Wall Street Prep AI for Business & Finance: https://ryano.finance/columbia-ai
2. Wharton & Wall Street Prep Real Estate Investing & Analysis: https://ryano.finance/wharton-real-estate
3. Wharton & Wall Street Prep Private Equity (PE): https://ryano.finance/wharton-pe
4. Wharton & Wall Street Prep Financial Planning & Analysis (FP&A): https://ryano.finance/wharton-fpa
5. Wharton & Wall Street Prep Value Investing: https://ryano.finance/wharton-avi
*Get 10% Off Snowball Analytics to help manage your portfolio with code RYAN here:*
https://snowball-analytics.com/register/ryan
*Disclosure: This is not financial advice and should not be taken as such. The information contained in this video is an opinion. Some of the information could be wrong. This channel is owned and operated by Portfolio Constructs LLC. Some of the links above are affiliate links, meaning, at no additional cost to you, I will earn a commission if you click through and make a purchase.
