README.md
In waccR: Cost of Capital by Sector Data

waccR

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/