The weighted average cost of capital (WACC) is:
A) the required rate of return for all of a firm's capital investment projects.
B) the required rate of return for a firm's average risk projects.
C) not applicable for use by MNE.
D) equal to 13%.

Question

Quizplus · Accepted Answer

The weighted average cost of capital (WACC) is the average cost of financing a company's assets. It is the required rate of return that a firm must earn on its average-risk projects to satisfy its investors, both equity, and debt. Therefore, it is the required rate of return for a firm's average risk projects. Option A is incorrect because the WACC is not the required rate of return for all of a firm's capital investment projects. Option C is incorrect because the WACC is applicable for use by multinational enterprises (MNEs). Option D is incorrect because it does not provide any context or explanation for the WACC.

The Weighted Average Cost of Capital (WACC) Is