Weighted Average Cost of Capital (WACC)
Definition
The average rate a company expects to pay to finance its assets, weighted by the proportion of each financing source (debt and equity). Used as a discount rate in valuation.
Formula / Rules
WACC = (E/V × Re) + (D/V × Rd × (1 - Tc))
Example
A company with WACC of 8% uses this rate to discount future cash flows in DCF analysis.
Related Terms
Frequently Asked Question
What is WACC?
WACC (Weighted Average Cost of Capital) is the average rate a company expects to pay to finance its assets, weighted by the proportion of each financing source. It is used as a discount rate in valuations such as DCF analysis.
APA Citation
Last updated:
· Source: VixShield Trading Glossary — From SPX Mastery by Russell Clark
⚠️ Not financial advice. This definition is educational content from the SPX Mastery book series by Russell Clark (VixShield). Past performance is not indicative of future results. Trading options involves substantial risk of loss and is not appropriate for all investors. Always paper trade before risking real capital.