What is Weighted Average Cost of Capital?
A definition of Weighted Average Cost of Capital
“The Weighted Average Cost of Capital (WACC) is a firm’s average cost of capital from all sources, including equity and debt, weighted according to their proportionate use in financing the company’s activities.”

Business Glossary > What is Weighted Average Cost of Capital?
Examples of Weighted Average Cost of Capital in a Sentence:
Investors use the Weighted Average Cost of Capital to assess investment opportunities.
A company’s WACC helps determine its risk level for potential investors.
Reducing the WACC can improve a company’s profitability.
Why is Weighted Average Cost of Capital Important in Business?
Understanding the Weighted Average Cost of Capital is crucial for determining the minimum return a company needs to generate in order to satisfy its investors or creditors. Lowering WACC can increase a company’s value by reducing its overall cost of financing.
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Associated Terms
Here are some associated business terms and synonyms for “Weighted Average Cost of Capital”:
- WACC
- Cost of Capital
- Capital Cost
Apple Inc. Weighted Average Cost of Capital
Apple calculates its Weighted Average Cost of Capital to determine the feasibility of potential investments and to maintain its competitive edge. By keeping its WACC low, Apple ensures greater value creation for its shareholders.
Final Notes on Weighted Average Cost of Capital
When evaluating WACC, companies should consider:
- The proportion of different funding sources
- Market conditions affecting interest rates
- The impact of WACC on investment decisions and overall company value
These considerations are essential for strategic financial planning.
This has been a definition of Weighted Average Cost of Capital meaning.
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