Series 79: Weighted Average Cost Of Capital (WACC)

Taken from our FINRA Investment Banking Exam

Definition of the term Weighted Average Cost Of Capital (WACC)...

the cost of capital weighted based on the percentage of debt versus equity in the capital structure. The formula for WACC is: WACC = (pre-tax cost of debt x (1 - tax rate) x % of debt) + (cost of equity x % of equity).

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