WACC is short for weighted average cost of capital.
WACC is used in financial circles to test whether a return on investment can exceed or meet an asset, project, or company’s cost of invested capital.
Formula to calculate WACC.
Example:
Suppose the cost of equity is $ 1000 while the cost of debt is $200, if the percentage cost of equity is 2% and the percentage cost of debt is 3%, calculate WACC if your tax rate is 2%.
Therefore, your WACC is 2.16%.
