The weighted average cost of capital for a firm is the:
A) discount rate which the firm should apply to all of the projects it undertakes.
B) overall rate which the firm must earn on its existing assets to maintain the value of its stock.
C) rate the firm should expect to pay on its next bond issue.
D) maximum rate which the firm should require on any projects it undertakes.
E) rate of return that the firm's preferred stockholders should expect to earn over the long term.

Question

Quizplus · Accepted Answer

The weighted average cost of capital (WACC) is the average rate that a company is expected to pay to finance its assets, and it represents the minimum return that a company must earn on its existing asset base to maintain its stock value.

The Weighted Average Cost of Capital for a Firm Is