#cfa-level-1 #corporate-finance #reading-36-cost-of-capital
The weights in this weighted average are the proportions of the various sources of capital that the company uses to support its investment program.
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2. COST OF CAPITALage of these costs. This weighted average is referred to as the weighted average cost of capital (WACC). The WACC is also referred to as the marginal cost of capital (MCC) because it is the cost that a company incurs for additional capital. <span>The weights in this weighted average are the proportions of the various sources of capital that the company uses to support its investment program. Therefore, the WACC, in its most general terms, is
Equation (1)
WACC = w d r d (1 – t) + w p r p + w e r e
where
w d = the prop Summary
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