The weighted average cost of capital represents the maximum required rate of return on a capital-budgeting project and is found by multiplying the cost of each capital structure component by its appropriate weight and summing the terms.

Question

Quizplus · Accepted Answer

The weighted average cost of capital (WACC) represents the minimum required rate of return on a capital-budgeting project, not the maximum. It is calculated by multiplying the cost of each capital structure component by its appropriate weight and summing the terms.

The Weighted Average Cost of Capital Represents the Maximum Required