What is WACC?
The cost of capital is the rate of return requiredby a capital provider in exchange for foregoing aninvestment in another project or business withsimilar risk. Thus, it is also known as anopportunity cost
WACC is calculated taking into account therelative weights of each component of the capitalstructure- debt and equity, and is used to see ifthe investment is worthwhile to undertake
The WACC is set by the investors (or markets),not by managers. Therefore, we cannot
the true WACC, we can only
The minimum return that a company must earnon existing asset base to satisfy its creditors,owners, and other providers of capital