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Home > QFINANCE Dictionary > Definition of weighted average cost of capital

Definition of

weighted average cost of capital

Finance

average cost of firm's capital the average cost of a company's financing (equity, debentures, bank loans) weighted according to the proportion each element bears to the total pool of capital. Weighting is usually based on market valuations, current yields, and costs after tax. The weighted average cost of capital is often used as the hurdle rate for investment decisions, and as the measure to be minimized in order to find the optimal capital structure for the company.

Recommended Further Reading (Term count)
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Definitions of ’weighted average cost of capital’ and meaning of ’weighted average cost of capital’ are from the book publication, QFINANCE – The Ultimate Resource, © 2009 Bloomsbury Information Ltd. Find definitions for ’weighted average cost of capital’ and other financial terms with our online QFINANCE Financial Dictionary.

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