It weighs equity and debt proportionally to its percentage of the total capital structure. A company's executives use WACC in making decisions about how to fund operations or projects, and it ...

The WACC takes into account the relative weights of each component of the company’s capital structure, such as debt and equity, to calculate the average cost of capital for the company as a whole.

Bankruptcy costs can erode a company;s capital structure. While debt may be a good way to finance a company's operations, it ...

Esty, Benjamin C., and E. Scott Mayfield. "The Weighted Average Cost of Capital (WACC): Derivation, Intuition, and Applications." Harvard Business School Technical Note 221-106, June 2021.

Capital structure matters because it affects the project's weighted average cost of capital (WACC), which is the minimum rate of return that the project needs to earn to satisfy its investors.

Because many projects are funded in multiple ways, companies will often calculate a weighted average cost of capital (WACC) in budgeting for a potential new initiative. The discount rate is the ...