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WACC calculates a Company’s average Cost of Capital from all sources of capital, Common and Preferred Stock and Debt. WACC is expressed as a percent, setting a Benchmark return for future investments.

Companies need to fund their operations via a combination of Debt and Equity. The cost of Debt is simply the Interest Rate, minus the tax shield, an obligation paid to Debt Holders. The cost of Equity is the Dividend payment paid to Equity Holder. For Common Stock this is not an obligation but an expectation. For Preferred Stock it is an obligation, which can be quantified. The Weighted Average Cost of Capital (WACC) calculates a Company’s average Cost of Capital including Common Stock, Preferred Stock and Total Debt. The WACC is expressed as a percent. The percent calculated determines the required rate of return on forthcoming CAPEX programs. For an acquisition, a benchmark rate of return is set for the acquisition to be additive.


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Warren William

Meet the author behind Smartest-Data. Warren William has a career in Finance and Investments extending over 35 years, both on the Buy Side and Sell Side. His most recent roles include, developing Institutional Risk Management Programs for managing Equity and Fixed Income Risk.  Prior to this Warren William work in Alternative Investments, in Investment Management and as a Buy Side Equity Analyst. Warren William brings a wealth of knowledge and expertise to the table, providing in-depth analysis and commentary on the latest trends in the Stock Markets. Contact information: or Telegram +393339034488

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