Businesses frequently wonder what WACC is and whether it is actually helpful for running their operations.
Weighted Average Cost of Capital (“WACC”) is the average blended cost of capital across all diverse sources, including common stock, preferred shares, and debt. The cost of each type of capital is weighted as a percentage of the total capital and they are added together. This article will provide a decomposition of WACC, highlight its uses, how to calculate it, and will provide examples.