A firm's weighted average cost of capital is

Question

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A firm's weighted average cost of capital (WACC) is the average of the costs of all the types of capital that the firm uses to finance its operations. This includes debt, preferred stock, common equity, and any other long-term financing methods. The WACC is not simply the current required rates of return on debt and equity, as stated in choice B. Choice A is incorrect because the WACC is not only applicable to new forms of capital. Choice C is incorrect as it suggests that the WACC is based on either equity or debt capital only, which is not the case.

A Firm's Weighted Average Cost of Capital Is