The weighted average cost of capital is the interest rate that is used in calculating the net present value for capital budgeting.

Question

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The weighted average cost of capital (WACC) represents the average rate of return a company is expected to pay its security holders to finance its assets. It is used as a hurdle rate in capital budgeting to discount future cash flows for determining their net present value (NPV).

The Weighted Average Cost of Capital Is the Interest Rate