Definition for : Weighted Average Cost of Capital, WACC

Weighted average cost of Capital is the Rate of return required by the providers of funds (Shareholders and creditors) to finance the company's Investment projects. Weighted average cost of Capital is the overall cost of financing of a company. According to the Theory of markets in equilibrium, and provided there are no tax distortions, this cost is independent of the Capital structure of the company; hence, Optimal capital structure does not exist. Weighted average cost of Capital can be also called Cost of capital.

(See Chapters Chapter 30 Risk and investment analysis,Chapter 32 Capital structure and the theory of perfect capital markets and Chapter 33 Capital structure, taxes and organisation theories of the Vernimmen)

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