Start networking and exchanging professional insights

Register now or log in to join your professional community.

Follow

Does Weighted average cost of capital is an important part of financial calculations?

user-image
Question added by Muhammad Usman Tariq , Visiting Faculty , National University of Science and Technology
Date Posted: 2014/10/09

Yes

 

A calculation of a firm's cost of capital in which each category of capital is proportionately weighted. All capital sources - common stock, preferred stock, bonds and any other long-term debt - are included in a WACC calculation. All else equal, the WACC of a firm increases as the beta and rate of return on equity increases, as an increase in WACC notes a decrease in valuation and a higher risk.

More Questions Like This