The rate of return which a ﬁrm must earn on its existing assets if the ﬁrm is to maintain the value of its stock is called the:

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The weighted average cost of capital (WACC) is the rate of return that a company must earn on its existing assets to maintain the current value of its stock. It takes into account the cost of equity and cost of debt, which are the two sources of financing for a firm. By achieving a return greater than the WACC, a firm is able to create value for its shareholders.

The Rate of Return Which a ﬁRm Must Earn on Its