Share
Explore BrainMass

Weighted Average Cost of Capital

The weighted average cost of capital (WACC) reflects, on the average, the firm's cost of long-term financing. Given the costs of the specific sources of financing, how would you obtain the appropriate weights for use in calculating a firm's WACC?

Spend a few moments considering this question

Solution Preview

The weighted average cost of capital (WACC) reflects, on the average, the firm's cost of long-term financing. Given the costs of the specific sources of financing, how would you obtain the appropriate weights for use in calculating a firm's WACC?

Appropriate weights for use in firm's WACC :

There can be two choices:
1. Book value of the source of financing
It is based on the value of the capital recorded in the balance ...

Solution Summary

This explains the concept of Weighted Average Cost of Capital

$2.19