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WACC – Weighted Average Cost of Capital

Source: Wikipedia
Last Sourced: 2021-02-01
This Article has been Edited for Accessibility

Further Reading


WACC the dog: The effect of financing costs on the levelized cost of solar PV powerWACC the dog: The effect of financing costs on the levelized cost of solar PV power
www.sciencedirect.com [PDF]
… and Mulder [11], using a different dataset, find a strong positive influence of economic and regulatory … The blue curve shows the linear relationship of LCOE to WACC, while the red curve … perspective in the investigation of the role of financing costs for the economics of solar PV …

Investment, financing and the role of ROA and WACC in value creationInvestment, financing and the role of ROA and WACC in value creation
www.sciencedirect.com [PDF]
… and Mulder [11], using a different dataset, find a strong positive influence of economic and regulatory … The blue curve shows the linear relationship of LCOE to WACC, while the red curve … perspective in the investigation of the role of financing costs for the economics of solar PV …

A General Formula for the WACCA General Formula for the WACC
papers.ssrn.com [PDF]
… and Mulder [11], using a different dataset, find a strong positive influence of economic and regulatory … The blue curve shows the linear relationship of LCOE to WACC, while the red curve … perspective in the investigation of the role of financing costs for the economics of solar PV …

A More Realistic Valuation: APV and WACC with constant book leverage ratioA More Realistic Valuation: APV and WACC with constant book leverage ratio
papers.ssrn.com [PDF]
… and Mulder [11], using a different dataset, find a strong positive influence of economic and regulatory … The blue curve shows the linear relationship of LCOE to WACC, while the red curve … perspective in the investigation of the role of financing costs for the economics of solar PV …

WACC: definition, misconceptions, and errorsWACC: definition, misconceptions, and errors
www.bvreview.org [PDF]
… and Mulder [11], using a different dataset, find a strong positive influence of economic and regulatory … The blue curve shows the linear relationship of LCOE to WACC, while the red curve … perspective in the investigation of the role of financing costs for the economics of solar PV …

Valuing firm's financial flexibility under default risk and bankruptcy costs: a WACC based approachValuing firm's financial flexibility under default risk and bankruptcy costs: a WACC based approach
www.emerald.com [PDF]
… and Mulder [11], using a different dataset, find a strong positive influence of economic and regulatory … The blue curve shows the linear relationship of LCOE to WACC, while the red curve … perspective in the investigation of the role of financing costs for the economics of solar PV …

WACC and a generalized tax codeWACC and a generalized tax code
www.tandfonline.com [PDF]
… and Mulder [11], using a different dataset, find a strong positive influence of economic and regulatory … The blue curve shows the linear relationship of LCOE to WACC, while the red curve … perspective in the investigation of the role of financing costs for the economics of solar PV …

A General Formula for the WACC: a CommentA General Formula for the WACC: a Comment
papers.ssrn.com [PDF]
… and Mulder [11], using a different dataset, find a strong positive influence of economic and regulatory … The blue curve shows the linear relationship of LCOE to WACC, while the red curve … perspective in the investigation of the role of financing costs for the economics of solar PV …

The search for the best financial performance measureThe search for the best financial performance measure
www.tandfonline.com [PDF]
… and Mulder [11], using a different dataset, find a strong positive influence of economic and regulatory … The blue curve shows the linear relationship of LCOE to WACC, while the red curve … perspective in the investigation of the role of financing costs for the economics of solar PV …



Q&A About WACC – Weighted Average Cost of Capital


What does WACC stand for?

Weighted Average Cost of Capital.

What are some alternative investments?

Some alternative investments are debt and equity securities in other companies, government bonds, or treasury bills.

How can you evaluate new projects with the help of the cost of capital?

You can evaluate new projects by comparing their expected returns against this benchmark.

Are there different types of costs associated with raising funds from investors?

Yes, there are different types.

What does weighted mean in this context?

Weighted means that each component has been given a weight based on how much it contributes financially to the company's operations.

How do you calculate this weighted average cost?

You add up all your costs and divide by your total funding sources. For example, if you have $100 million in long-term debt at 5%, $50 million in short-term loans at 10%, $200 million in common stock with a dividend yield of 5%, and $50 million in preferred stock paying 8% interest; your weighted average cost would be 7%. This is calculated as follows ($100 +$50+$200+$50)/($100 +$50+$200+$50). The result is 7%. If you had more components it would get more complicated but conceptually it stays the same.""

What does the cost of capital do?

The cost of capital sets a benchmark that new projects have to meet.

What is the cost of capital?

The cost of capital is the minimum return that investors expect for providing capital to a company.

What are sources of financing?

Sources of financing include common stock, preferred stock, long-term debt, short-term debt, and cash from operations.

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