The weighted average cost of capital should be used when making investment decisions regardless of the specific financing used to fund a project.

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The weighted average cost of capital (WACC) is the minimum rate of return that a company must earn on its investments in order to satisfy its creditors, owners, and other stakeholders. By calculating the WACC, a company can determine whether a potential investment opportunity is worth pursuing or not. Since the WACC takes into account the costs of all sources of financing (debt and equity), it provides a more accurate estimate of the true cost of capital than using just one method of financing. Therefore, the WACC should be used as the discount rate when evaluating investment opportunities regardless of the specific financing used.

The Weighted Average Cost of Capital Should Be Used When