Weighted Average Cost of Capital (WACC)

Cost of Capital
The cost of capital is the return, expressed in terms of an interest rate, required by an organization to finance its activities. It can vary depending on the types of capital employed, such as equity share capital or loan capital. A unique weighted average cost of capital (WACC) is often computed for each organization based on their specific mix of capital sources. The cost of capital is frequently used as a hurdle rate in discounted cash flow calculations.

Accounting Terms Lexicon

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