The weighted average cost of capital (WACC) includes

Question

Quizplus · Accepted Answer

The weighted average cost of capital (WACC) is the average cost of all the funding sources (debt and equity) used by a company. Therefore, it includes the cost of any debt and the cost of equity. Option A is incorrect because it states required return on equity and required return on underlying firm assets, which is not accurate as the required return on equity is already part of the WACC calculation. Option C is incorrect because it only considers the cost of debt and ignores the cost of equity, which is a crucial element in the WACC calculation. Option D is incorrect as the WACC is a commonly used financial metric in corporate finance.

The Weighted Average Cost of Capital (WACC) Includes