Weighted Average Cost
This Discussion topic is the Weighted Average Cost of Capital.
A company’s cost of capital is a weighted average of the returns demanded by debt and equity investors. The weighted average is the expected rate of return investors would demand on a portfolio of all the firm’s outstanding securities.
Exactly what sources of financing would be included in a typical company’s weighted average cost of capital?
Which source would be most common for a typical company in today’s business environment?
Which source would normally be most costly? Which source would cost the company the least?
When would the weighted average cost of capital not be appropriate for assessing a proposed project?
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