Question

If total weighted cost of capital is divided by total weight of capital what shall we get?

Answer 1

Capital - WACC?

The weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is proportionately weighted. All sources of capital, including common stock, preferred stock, bonds and any other long-term debt, are included in a WACC calculation. A firm’s WACC increases as the beta and rate of return on equity increase because an increase in WACC denotes a decrease in valuation and an increase in risk.

The Formula for Weighted Average Cost of Capital - WACC Is

Weighted Average Cost of Capital = Percent financed with debt * Cost of equity + Percent financed with debt * Cost of debt * (1 - Corporate tax rate)

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