单词 | weighted average cost of capital |
释义 | weighted average cost of capital weighted average cost of capital(WACC) A method for calculating the average cost of a company’s different sources of finance. The WACC is calculated on the assumption that the company will maintain the same debt–equity ratio. Managers should only use the WACC as an appropriate discount rate for a project when the project has about the same level of risk as the company. The most difficult part of the calculation is the estimate for the cost of equity. In theory, a company can lower its weighted average cost of capital by increasing the proportion of debt. However, this could become a problem for shareholders, who may feel that higher levels of debt will increase the risk of their investment. See alsocost of capital. |
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