Investing
Capital structure weights
Market value shares, which by construction sum to one.
The Formula
E / V and D / V, where V = E + D
Market value shares, which by construction sum to one.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| E | Equity | currency | The market value of the equity. |
| D | Debt | currency | The market value of the debt. |
| V | Total capital | currency | Equity plus debt. |
What Each Symbol Means
Ecurrency
Equity
The market value of the equity.
Dcurrency
Debt
The market value of the debt.
Vcurrency
Total capital
Equity plus debt.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate weighted average cost of capital page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate Weighted Average Cost Of Capital, filed under Finance. Every number the guide produces comes from substituting into this one line.