# 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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This rate is commonly referred to as the weighted average cost of capital ("WACC") and asked participants to indicate how useful they thought such a technique would be for six types of institutions: publicly-traded for-profit (non-educational), privately owned for profit (non-educational), publicly-traded for-profit college, privately-owned for-profit college, private not-for-profit college, public college.
91 EXHIBIT 3 Weighted Average Cost of Capital (dollars in millions) Capital Structure (Unadjusted) Current Weiqht Market Value of Debt 1,200.
2]: ERM implementation has a positive effect on reducing Weighted Average Cost of Capital.
In this point, we must observe index known as weighted average cost of capital (WACC), designed for computing cost of financing sources acquired and/or used by a firm in the long run--i.
8 per cent weighted average cost of capital (WACC), so there is still some ground to cover before achieving sustainable margins.
In this case, the cost of equity is also the company's weighted average cost of capital.
In formula 10 there is a reference to weighted average cost of capital from formula 2, which should be expanded to the following shape:
It uses adjusted after-tax profits, less adjusted capital invested, times by the weighted average cost of capital.
The primary subject matter of this case concerns the issues surrounding a firm's weighted average cost of capital (WACC).
For these purposes, we will build a company finance structure optimisation model, based on the weighted average cost of capital criterion.
Capital management is comprised of three basic components: the cost of equity, the cost of debt, and the weighted average of the costs of these two capital sources, known as the weighted average cost of capital (WACC).

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