Definition
The Weighted Average Cost of Capital (WACC) is the average rate of return a company is expected to pay to finance its operations through debt and equity, weighted by the proportion of each in the company's capital structure.
Related Services
Financial modeling, investment analysis, and capital structure optimization services help businesses calculate and manage their WACC. These services are crucial for making informed decisions about financing strategies.
Problem and Application
A company�s WACC is used to evaluate investment opportunities and assess the cost of capital. It�s important to keep WACC low while balancing the risk of debt, as high WACC can make investment projects less attractive.
Conclusion
WACC is a critical metric in evaluating investment decisions and capital costs. Maintaining an optimal WACC helps companies make financially sound decisions while managing risk.
