Weighted Average Cost of Capital (WACC)

Weighted Average Cost of Capital (WACC) is a key metric to assess a company’s funding cost. It considers the average rate a company expects to pay to raise capital, including debt (bonds) and equity (stocks). Imagine it as a blended interest rate, weighted by how much of each type of capital the company uses. A lower WACC indicates a company can access cheaper financing, potentially leading to higher profitability.