## Overall Cost of Capital Solution

STEP 0: Pre-Calculation Summary
Formula Used
Overall Cost of Capital = (Market Value of the Firm’s Equity)/(Market Value of the Firm’s Equity+Market Value of the Firm’s Debt)*Required Rate of Return+(Market Value of the Firm’s Debt)/(Market Value of the Firm’s Equity+Market Value of the Firm’s Debt)*Cost of Debt*(1-Tax Rate)
OCC = (E)/(E+MV)*RR+(MV)/(E+MV)*Rd*(1-Tr)
This formula uses 6 Variables
Variables Used
Overall Cost of Capital - Overall Cost of Capital is a model, which makes it a vital concept, especially for finance professionals in business development and investment banking.
Market Value of the Firm’s Equity - Market Value of the Firm’s Equity is the total dollar market value of all of a company's outstanding shares.
Market Value of the Firm’s Debt - The Market Value of the Firm’s Debt is the total dollar debt value of all of a firm such as bonds and loans.
Required Rate of Return - Required Rate of Return is the minimum return an investor expects for taking on the risk of investing in a particular asset, such as stocks or bonds.
Cost of Debt - Cost of Debt is the effective interest rate a company pays on its debt.
Tax Rate - Tax Rate refers to the percentage at which a taxpayer's income or the value of a good or service is taxed.
STEP 1: Convert Input(s) to Base Unit
Market Value of the Firm’s Equity: 500 --> No Conversion Required
Market Value of the Firm’s Debt: 2100 --> No Conversion Required
Required Rate of Return: 0.09 --> No Conversion Required
Cost of Debt: 95 --> No Conversion Required
Tax Rate: 0.3 --> No Conversion Required
STEP 2: Evaluate Formula
Substituting Input Values in Formula
OCC = (E)/(E+MV)*RR+(MV)/(E+MV)*Rd*(1-Tr) --> (500)/(500+2100)*0.09+(2100)/(500+2100)*95*(1-0.3)
Evaluating ... ...
OCC = 53.7288461538461
STEP 3: Convert Result to Output's Unit
53.7288461538461 --> No Conversion Required
53.7288461538461 53.72885 <-- Overall Cost of Capital
(Calculation completed in 00.004 seconds)
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## Credits

Created by Vishnu K
BMS College of Engineering (BMSCE), Bangalore
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Verified by Parminder Singh
Chandigarh University (CU), Punjab
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## <Capital Budgeting Calculators

Cost of Retained Earnings
​ Go Cost of Retained Earnings = (Dividend/Current Stock Price)+Growth Rate
After-Tax Cost of Debt
​ Go After Tax Cost of Debt = (Risk Free Rate+Credit Spread)*(1-Tax Rate)
Payback Period
​ Go Payback Period = Initial Investment/Cashflow per Period
Cost of Debt
​ Go Cost of Debt = Interest Expense*(1-Tax Rate)

## Overall Cost of Capital Formula

Overall Cost of Capital = (Market Value of the Firm’s Equity)/(Market Value of the Firm’s Equity+Market Value of the Firm’s Debt)*Required Rate of Return+(Market Value of the Firm’s Debt)/(Market Value of the Firm’s Equity+Market Value of the Firm’s Debt)*Cost of Debt*(1-Tax Rate)
OCC = (E)/(E+MV)*RR+(MV)/(E+MV)*Rd*(1-Tr)

## What is Overall Cost of Capital?

The term "overall cost of capital" is an alternative name for the Weighted Average Cost of Capital (WACC). The overall cost of capital represents the average cost a company incurs to finance its operations through a mix of debt and equity. It takes into account the cost of both debt and equity, considering their respective proportions in the company's capital structure.

The WACC is calculated by weighting the cost of debt and the cost of equity based on their relative weights in the capital structure.

## How to Calculate Overall Cost of Capital?

Overall Cost of Capital calculator uses Overall Cost of Capital = (Market Value of the Firm’s Equity)/(Market Value of the Firm’s Equity+Market Value of the Firm’s Debt)*Required Rate of Return+(Market Value of the Firm’s Debt)/(Market Value of the Firm’s Equity+Market Value of the Firm’s Debt)*Cost of Debt*(1-Tax Rate) to calculate the Overall Cost of Capital, The Overall Cost of Capital formula is defined as the average cost a company incurs to finance its operations through a mix of debt and equity. Overall Cost of Capital is denoted by OCC symbol.

How to calculate Overall Cost of Capital using this online calculator? To use this online calculator for Overall Cost of Capital, enter Market Value of the Firm’s Equity (E), Market Value of the Firm’s Debt (MV), Required Rate of Return (RR), Cost of Debt (Rd) & Tax Rate (Tr) and hit the calculate button. Here is how the Overall Cost of Capital calculation can be explained with given input values -> 53.72885 = (500)/(500+2100)*0.09+(2100)/(500+2100)*95*(1-0.3).

### FAQ

What is Overall Cost of Capital?
The Overall Cost of Capital formula is defined as the average cost a company incurs to finance its operations through a mix of debt and equity and is represented as OCC = (E)/(E+MV)*RR+(MV)/(E+MV)*Rd*(1-Tr) or Overall Cost of Capital = (Market Value of the Firm’s Equity)/(Market Value of the Firm’s Equity+Market Value of the Firm’s Debt)*Required Rate of Return+(Market Value of the Firm’s Debt)/(Market Value of the Firm’s Equity+Market Value of the Firm’s Debt)*Cost of Debt*(1-Tax Rate). Market Value of the Firm’s Equity is the total dollar market value of all of a company's outstanding shares, The Market Value of the Firm’s Debt is the total dollar debt value of all of a firm such as bonds and loans, Required Rate of Return is the minimum return an investor expects for taking on the risk of investing in a particular asset, such as stocks or bonds, Cost of Debt is the effective interest rate a company pays on its debt & Tax Rate refers to the percentage at which a taxpayer's income or the value of a good or service is taxed.
How to calculate Overall Cost of Capital?
The Overall Cost of Capital formula is defined as the average cost a company incurs to finance its operations through a mix of debt and equity is calculated using Overall Cost of Capital = (Market Value of the Firm’s Equity)/(Market Value of the Firm’s Equity+Market Value of the Firm’s Debt)*Required Rate of Return+(Market Value of the Firm’s Debt)/(Market Value of the Firm’s Equity+Market Value of the Firm’s Debt)*Cost of Debt*(1-Tax Rate). To calculate Overall Cost of Capital, you need Market Value of the Firm’s Equity (E), Market Value of the Firm’s Debt (MV), Required Rate of Return (RR), Cost of Debt (Rd) & Tax Rate (Tr). With our tool, you need to enter the respective value for Market Value of the Firm’s Equity, Market Value of the Firm’s Debt, Required Rate of Return, Cost of Debt & Tax Rate and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.
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