When we looked at return on invested capital a few weeks ago, we briefly touched on the weighted average cost of capital. While the brief definition helped us to define ROIC, it wasn't nearly as in-depth of a definition as this term deserves. So let's take a ride through the ins and outs of weighted average cost of capital (WACC).
WACC: The Basics
First, before we go too far, let's quickly redefine capital: capital is anything of cash value that the company owns, including cash and goods that can be sold for cash. Okay, now that that is out of the way, let's look at WACC.
Recent comments