A firm’s Weighted Average Cost of Capital (WACC) represents its blended cost of capital across all sources, including common shares, preferred shares, and debt. The cost of each type of capital is weighted by its percentage of total capital and they are added together.
Explain why WACC is important and how it is used by investors and the company for their respective purposes.
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A firm's Weighted Average Cost of Capital (WACC) represents its blended cost of capital. Before a business can turn a profit, it must at least generate sufficient income to cover the cost of funding its operation. across all sources, including common shares, preferred shares, and debt.
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