Which of the following statements is true?

Question

Quizplus · Accepted Answer

The weighted average cost of capital (WACC) is a measure of the cost of capital (both equity and debt) for a firm, reflecting the required return by investors. It is often compared to return on assets (ROA) or other profitability metrics to assess whether an investment is generating sufficient returns to justify the risk and cost of capital. Comparing WACC to share capital, price-earnings ratio, or including non-current assets in its calculation are not standard practices or interpretations of WACC.

Which of the Following Statements Is True