Weighted Average Cost of Capital — the blended cost of a company’s debt and equity funding.
WACC is the hurdle rate: projects returning less than WACC destroy value even if “profitable.” It is also the discount rate in most DCF valuations.
Example: 70% equity at 12% + 30% debt at 6% after-tax ≈ 10.2% WACC.
FAQ
What is WACC in simple terms?
WACC is the hurdle rate: projects returning less than WACC destroy value even if “profitable.” It is also the discount rate in most DCF valuations.