waccr is an R package for the analysis of Aswath Damodaran’s weighted cost of capital (WACC) data. It simply downloads Professor Damodaran’s data set into R and tidies it.
devtools::install_github("RobertMyles/waccR") library(waccR) w_data <- wacc()
The Weighted Average Cost of Capital (WACC) represents the average cost of financing a company’s debt and equity. There are two approches to calculating it, one based on the “Build-up” approach, the other on the Capital Assets Pricing Model (CAPM) approach.
WACC = Ce × E + Cd × D
where Cd is the after-tax cost of debt, E and D the proportion of equity and debt in a firm based on market value, and Ce is the cost of equity, which, using the CAPM approach, is calculated with:
Ce = Rf + β(Rm)+Rs + Risk + Firm Risk
where Rf is risk-free rate, Rm is the market premium, Rs is the company size premium, Risk the country risk premium, Firm Risk the firm-specific risk and β is a measure of the systematic risk, usually of the industry sector, in comparison to the market as a whole.
β for various sectors of US industry is available with:
betas() #> # A tibble: 94 x 7 #> Industry Number_Firms Av_Unlevered_Beta Av_Levered_Beta #> <chr> <dbl> <dbl> <dbl> #> 1 Advertising 41 0.91 1.36 #> 2 Aerospace/Defense 96 0.94 1.07 #> 3 Air Transport 18 0.76 1.12 #> 4 Apparel 58 0.71 0.88 #> 5 Auto & Truck 15 0.38 0.85 #> 6 Auto Parts 63 0.94 1.12 #> 7 Bank (Money Center) 10 0.41 0.86 #> 8 Banks (Regional) 645 0.36 0.47 #> 9 Beverage (Alcoholic) 25 0.71 0.79 #> 10 Beverage (Soft) 36 0.78 0.91 #> # ... with 84 more rows, and 3 more variables: Av_Corr_Market <dbl>, #> # Total_Unlevered_Beta <dbl>, Total_Levered_Beta <dbl>
For more, see Professor Damodaran’s webpage: http://people.stern.nyu.edu/adamodar/