WACC: Weighted Average Cost of Capital
WACC (Weighted Average Cost of Capital) is the rate a company pays on average to finance its assets.
WACC Formula
WACC = (E/V × Re) + (D/V × Rd × (1 - Tc))
Example Calculation
Why WACC Matters
- Doesn't account for time
- Doesn't account for risk
- Can be manipulated
WACC Components
- IRR: Internal rate of return
- NPV: Net present value
