DCF-WEIGHTED AVERAGE COST
Weighted Average Cost of Capital: Formula, Examples & How to Calculate Last Updated : 22 Apr, 2024 What is WACC? The Weighted Average Cost of Capital (WACC) is a financial metric that represents the average cost of the various sources of financing (equity, debt, preferred stock, etc.) used by a company to fund its operations. It is a crucial concept in corporate finance and capital budgeting decisions because it serves as the discount rate used to evaluate the feasibility of investment projects. A company's cost of capital is represented by its weighted average cost of capital (WACC), which is based on the proportionate weighting of each capital type (equity and debt). WACC may be computed by taking the market value of each capital source and multiplying its cost by its weight. The total can then be obtained by summing the results. WACC is frequently used as a benchmark rate by which businesses and investors assess whether a certain project or purchase is desirable. Wha...