Weighted Average Cost of Capital
Weighted average cost of capital (WACC) is the overall cost of capital for a firm, weighted by each capital component. It reflects the average rate a company is expected to pay its security holders to finance its assets.
Key Takeaways
- WACC represents a firm’s overall cost of capital.
- It is weighted by each component of capital.
- Used in financial modeling to value companies.
- Crucial for investment decisions.
