Weighted-average cost of capital is the expected rate of return on a portfolio of all the firm's securities, adjusted for tax savings related to interest payments.

Question

Quizplus · Accepted Answer

The statement accurately describes the concept of weighted-average cost of capital (WACC). WACC takes into account the cost of all forms of financing used by a company, such as equity and debt, and adjusts for the tax benefits of debt financing. It represents the minimum expected rate of return that a company must earn on its investments in order to satisfy its creditors, investors, and other stakeholders.

Weighted-Average Cost of Capital Is the Expected Rate of Return