WACC — Weighted Average Cost of Capital
Definition: The blended cost of a company's debt and equity, weighted by how much of each it uses. WACC is the discount rate most companies use to evaluate investments.
Example
A company with 60% equity at 12% cost and 40% debt at 5% has a WACC of roughly 9.2%.
When you'll hear it
WACC shows up most often in board meetings, quarterly business reviews, and strategy off-sites. When someone uses it, they're usually referring to weighted average cost of capital — and they expect the room to already know what that means.
FAQs
What does WACC stand for?
WACC stands for Weighted Average Cost of Capital.
What does WACC mean in business and finance?
The blended cost of a company's debt and equity, weighted by how much of each it uses. WACC is the discount rate most companies use to evaluate investments.
Where will I hear WACC used at work?
WACC comes up most often in board meetings, quarterly business reviews, and strategy off-sites. It's used as shorthand for weighted average cost of capital, so people assume you already know the term.