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What is Understanding Cost of Capital and WACC about?
The cost of capital is the required rate of return a firm must achieve to satisfy investors and debtholders, primarily sourced from debt and equity. The weighted-average cost of capital (WACC) represents the blended average of these funding sources and is essential for evaluating investment decisions. Firms should use the marginal cost of capital for future projects rather than historical rates to accurately reflect changes in their capital structure and risk profile.
- Author
- Eunice Membrebe
- Language
- EN