The weighted average cost of capital (WACC) is a financial ratio that measures a company's financing costs. It weighs equity and debt proportionally to its percentage of the total capital structure.

The WACC takes into account the relative weights of each component of the company’s capital structure, such as debt and equity, to calculate the average cost of capital for the company as a whole.

Since many companies rely on both debt and equity financing, WACC helps turn their cost of debt and cost of equity into one meaningful figure. It only makes sense for a company to proceed with a ...

Sean Ross is a strategic adviser at 1031x.com, Investopedia contributor, and the founder and manager of Free Lances Ltd. David Kindness is a Certified Public Accountant (CPA) and an expert in the ...

Esty, Benjamin C., and E. Scott Mayfield. "The Weighted Average Cost of Capital (WACC): Derivation, Intuition, and Applications." Harvard Business School Technical Note 221-106, June 2021.

the cost of equity jumps to 20% due to the levered beta increasing to 2.7. The 112 bps decrease in WACC translates to approximately an improvement of 0.6x in EV / EBITDA. As my target multiple in ...