The weighted average cost of capital should be used on projects of similar risk that are funded through:

Question

Quizplus · Accepted Answer

The weighted average cost of capital (WACC) is used to calculate the cost of capital for a project that is funded through a combination of debt and equity. The WACC is calculated by multiplying the cost of each type of capital by its weight in the capital structure. The cost of debt is the interest rate on the debt, and the cost of equity is the required return on equity. The weights are the proportions of debt and equity in the capital structure.

The Weighted Average Cost of Capital Should Be Used on Projects