The weighted average cost of capital (WACC) includes
A) the required return on equity and required return on underlying firm assets.
B) the cost of any long-term debt and the cost of equity.
C) the cost of any long-term debt and required return on underlying firm assets.
D) None of the above.

Question

Quizplus · Accepted Answer

The WACC includes both the cost of long-term debt and the cost of equity, as both sources of financing contribute to the overall cost of capital for a company. The required return on underlying firm assets is not included in the WACC calculation.

The Weighted Average Cost of Capital (WACC) Includes