A firm's weighted average cost of capital is

Question

Quizplus · Accepted Answer

The weighted average cost of capital (WACC) is the average cost of all the capital a company has raised, which includes both debt and equity. It is calculated by taking the weighted average of the cost of debt and cost of equity, where the weights are based on the proportion of debt and equity in the company's capital structure. Therefore, option B is correct. Option A is incorrect because WACC is the cost of capital currently used by the company and not for future capital. Option C is incorrect because WACC is the average cost of all the capital, and it cannot be higher than either equity or debt capital individually. Option D is incorrect as it is the only option.

A Firm's Weighted Average Cost of Capital Is