Finance glossary
WACC
Definition
Weighted Average Cost of Capital, the average rate a company pays to finance its assets.
WACC is the blended cost of capital across all sources, equity and debt, weighted by their proportion. It is used as the discount rate in DCF models. A company creates value when its return on invested capital exceeds its WACC. A higher WACC makes future cash flows worth less today.
In a sentence
The analyst discounted the company's future cash flows at its WACC of 9% to estimate what the business was worth today.
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