Apple's WACC The calculation of a firm’s cost of capital for each category of capital that is proportionately weighted is done by the weighted average cost of capital. The following are also included in calculating the WACC: common stock, any other long-term debt, preferred stock, and bonds. The WACC can be increased as the beta and the rate of return on equity continues to increase. For a company to have an increase in WACC, it implies that there is a decrease in valuation and an increase in the risk. The WACC can also be used as a hurdle rate against companies and investors can gauge ROIC performance. To calculate WACC, the following formula can be used: WACC= E/V * Re + D/V * Rd * (1-Tc) Weight Calculation The company’s assets are financed by their equity and debt, so in order to determine this information; we must calculate the weight of equity and the weight of debt. The market value of equity is also known as the market cap as well. For Apple, their market capitalization is $1501993.770 million. “As of Mar. 2020, Apple’s latest two-year average Short-Term Debt & Capital Lease Obligation was $18494 Mil and its latest two-year average Long-Term Debt & Capital Lease Obligation was $92771 Mil. The total Book Value of Debt (D) is $1111265 Mil” (Apple WACC). Weight of Equity= E/(E+D)= 1501933.770/ (1501933.770 + 111265) = 0.931 Weight of Debt= D/(E+D)= 111265/ (1501933.770 + 111265) = .069 Cost of Equity “The cost of equity is the return a company requires to decide if an investment meets capital return requirements” (Kenton, 2020). Cost of equity= .660% + 1.09 * 6%= 7.2% This is calculated by risk-free rate of return + beta of asset * (expected return of the market –risk free rate of return). Cost of Debt Apple’s interest expense as of Sept 2019 was $3576 mil and its total book value $111265 mil. Cost of debt= 3576/111265= 3.21% The next step would be to calculate the average tax rate minus 1. So one would take the WACC formula and multiply it by the 1-average tax rate and the formula for this is: WACC = E/(E/D) * Cost of equity + D/(E+D) * Cost of debt * (1-tax rate) The latest tax rate for Apple over the last two years averages to 17.14%. WACC= .931 * 7.2% + 3.21% * (1-17.14%) WACC= 6.89% For any company, it cost to raise capital. Any firm that is able to generate a higher ROIC% than it costs the company to raise the capital that is necessary for the investment is earning excess returns. With Apple’s WACC being 6.89% and their ROIC 22.56%, it implies that Apple is able to generate higher returns on their investment than it cost the company to raise capital that is needed to invest. As Apple continue to generate positive excess returns on new investments in the future, they will see their value increase as the growth continues to increase. 2 Corinthians 9:10AMP says, “Now He who provides seed for the sower and bread for the food will provide and multiply your seed for sowing [that is, your resources] and increase the harve.