r

_a

= r

_e

* E/(D+E) + r

_d

* D/(D+E) * (1-T)

r

_a

= Return on Assets

r

_e

= Return on Equity

r

_d

= Return on Debt

E = Equity Value

D = Debt Value

T = Tax Rate

Program a function to solve for WACC with the tax shield. Let’s pretend we already unlevered equity rates from other companies, and that’s how we got a baseline of what our expected equity return is.

Here are the example inputs:

Stock Price = $20.0

Stocks Outstanding = 100

Present Value of Debt = $1000.0

Debt Yield = 5%

Expected Equity Return = 10%

Tax Rate = 30%

The reason that I put 20.0 instead of 20 is because python will otherwise define 20 as an integer, meaning it will not expect the need to use a decimal.