The is the definitive benchmark for determining a company's blended cost of financing. Acting as the "hurdle rate," it represents the minimum return a business must generate to satisfy both its equity shareholders and debt lenders. The WACC Framework
WACC=(EV×Re)+(DV×Rd×(1−Tc))WACC equals open paren the fraction with numerator cap E and denominator cap V end-fraction cross cap R sub e close paren plus open paren the fraction with numerator cap D and denominator cap V end-fraction cross cap R sub d cross open paren 1 minus cap T sub c close paren close paren Review of method for determining the WACC
The standard method for determining WACC involves weighting the individual costs of each capital component—primarily equity and debt—by their respective proportions in the firm's total market value. The is the definitive benchmark for determining a
Cost of Capital: What It Is & How to Calculate It - HBS Online Cost of Capital: What It Is & How