Weighted average cost of capital

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Weighted average cost of capital (WACC)

Expected return on a portfolio of all a firm's securities. Used as a hurdle rate for capital investment. Often the weighted average of the cost of equity and the cost of debt The weights are determined by the relative proportions of equity and debt in a firm's capital structure.

Weighted Average Cost of Capital

A calculation of a company's cost of capital in which every source of capital is weighted in proportion to how much capital it contributes to the company. For example, if 75% of a company's capital comes from stock and 25% comes from debt, measuring the cost of capital weights these accordingly. A high WACC indicates that a company is spending a comparatively large amount of money in order to raise capital, which means that the company may be risky. On the other hand, a low WACC indicates that the company acquires capital cheaply.
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Total quantity or scope: Consulting services will be provided to verify the situation regarding costs, revenues and capital employed associated with the provision of services within the universal service, the underlying demand offset the net cost of universal service provision for the year 2014 and consulting services for decision support compensate the net cost (amount and modalities of compensation) - Lot 1, and consulting services to update the value weighted average cost of capital, identify and establish the technical and economic conditions that made access for developing a calculation model network costs and services offered by the designated universal service provider - Lot 2 (CPV code: 71621000-7), in accordance with the provisions of Section 2: Specifications.
Simply stated the weighted average cost of capital WACC is the cost the company is paying to finance its assets.
Assuming, for simplicity, that the corporate tax rate is constant over time, the weighted average cost of capital is defined as:
For rates of return, assume that a weighted average cost of capital discount rate of 15% is considered appropriate, given the nature of Company A's business and the risks underlying its cash flow projections.
Residual income was defined as net operating profit after taxes (NOPAT) minus a "capital charge" based on the capital assigned to the unit multiplied by GE's weighted average cost of capital.
Reconciling rates of return of the acquired entity's assets--A key element of a sound intangible asset valuation is to reconcile rates of return assigned to various tangible and intangible assets to the company's weighted average cost of capital.
We begin with an overview of capital budgeting and review those aspects of the weighted average cost of capital (WACC) formula that are controllable or otherwise thought to be influenced by finance.
Weighted Average Cost of Capital (WACC) WACC consists of the cost of equity added to the cost of debt, and its purpose is to express the return that a company must earn if it is to justify the financial resources that it uses.
The goal is to generate more value for VCP's stockholders by expanding the business, achieving excellence in performance and profitability, and improving the company's technological capabilities and products while ensuring a minimum return of 3% to 4% above the weighted average cost of capital (WACC).
Shimpi adds to the weighted average cost of capital equation the cost of ART capital.
In another finance-related article, the authors compare three methods of estimating a company's weighted average cost of capital and discuss the issues surrounding each.
The objective of this paper is to show that the current firm valuation process, by ignoring the fact that debt holders have a fixed claim on the assets of the firm, and using the weighted average cost of capital for making investment decisions, can lead to investment decisions that are contrary to the objective of maximizing shareholder wealth.

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