# WACC calculation

I am just going through this in 2009 AM. What a royal pain

drk Wrote: ------------------------------------------------------- > I am just going through this in 2009 AM. What a > royal pain Solve for X. Total beta of asset side has to equal total beta of liability side.

wtf…the LOS command words never say calculate.

There is an EOC problem that makes you calculate it. It’s also showed up on a few practice exams.

Got it. Thanks

Its really a 4 step thing Step 1) Multiple the % weight of equity to the beta to figure out the beta of the pension assets (ex. 60% equity x 1 = 0.6) Step 2): Figure out the new Asset beta by figuring out the ratio between the (new debt / total x 0 ) and the (equity / total x equity beta which stayed the same in this case) Step 3: With that new total asset beta, solve for the operating beta with the pension beta you calculated in step 1. Step 4: Apply this new operating asset beta in your WACC calculations to see what your new WACC is! Easy as cake! I am crossing my fingers that it is on the exam because they never really discuss it in the Schweser notes in detail and its not that that hard of a concept.