Weight Average Cost of Capital
A financial measure used to measure the the firm’s cost of capital along different fronts. The WACC takes into account the relative weights of the different components of capital to come up with an expected cost of new capital. Capital sources included in the WACC calculation includes common stock, preferred stock, bonds, and long term debts. WACC is a management tool that decide the economic feasibility of expansionary policies or mergers. WACC essentially combines debt and equity components to present the potential risk of an investment.
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