Respuesta :
The aftertax cost of debt ; it is highly dependent upon a company's tax rate.
What is the WACC?
Weighted cost of capital (WACC) measures a company's cost of capital. The cost of financing a company's assets. WACC is a weighted average of the different types of equity (debt, preferred stock, retained earnings and external capital) that a company can use to finance its operations.
The weighted average cost of capital (WACC) is the rate a company is expected to pay, on average, to all security holders to fund its assets. WACC is commonly referred to as a company's cost of capital. The point is that it is decided by the external market, not management. WACC represents the minimum rate of return a company must earn on its existing asset base in order to satisfy creditors, owners, other investors, or invest elsewhere.
Companies raise funds from various sources.Common stock, preferred stock and related rights, direct debt, convertible bonds, exchangeable debt, employee stock options, pension liabilities, officer stock options, government grants, etc. Different securities representing different funding sources are expected to generate different returns. WACC is calculated by considering the relative weight of each component of the capital structure. The more complex a company's capital structure, the more complex the WACC calculation.
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