Weighted average cost of capital
Weighted average cost of capital (also known by its acronym, WACC) is the weighted average of the after-tax component costs of capital—debt, preferred stock, and common equity. Each weighting factor is the proportion of that type of capital in the optimal, or target, capital structure.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Weighted average cost of capital (WACC). The weighted average of the after-tax component costs of capital—debt, preferred stock, and common equity. Each weighting factor is the proportion of that type of capital in the optimal, or target, capital structure.
According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),
- Weighted average cost of capital (WACC). A weighted average of the component costs of debt, preferred stock, and common equity.
According to the Corporate Strategy by Lynch (4th edition),
- Weighted average cost of capital. The combination of the costs of debt and equity capital in proportion to the capital structure of the organization. See also Cost of capital.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
