Weighted Average Cost of Capital

The weighted average cost of capital (WACC) is calculation of a firm’s cost of capital where each category regarding capital is proportionately weighted. All sources of capital, including frequent stock, preferred investment, bonds and every other long-term debt, are contained in a WACC calculation. A firm’s WACC increases because beta and rate of return about equity increase, as a possible increase in WACC denotes a lowering in valuation and a rise in risk.