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

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The weighted-average cost of capital (WACC) is the average cost of all the firm's financing sources, including debt and equity. It is calculated as a weighted average, with each financing source's cost and proportion in the firm's capital structure being taken into account. WACC is adjusted for the tax savings on interest payments because interest expenses are tax-deductible, which reduces the effective cost of debt.

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