A firm’s average cost of obtaining capital from debt and sale of stock, expressed as an average interest rate weighted by the firm’s percentages of debt and equity. For example, suppose a firm’s assets are 40 percent debt and 60 percent equity, and it pays 10 percent interest on debt and pays a 6 percent dividend on stock. Its WACC is 0.40(10) + 0.6(6) = 7.6 percent
WEIGHTED AVERAGE COST OR CAPITAL (WACC)
