The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets.
The WACC is the minimum return that a company must earn on existing asset base to satisfy its creditors, owners, and other providers of capital, or they will invest elsewhere. Companies raise money from a number of sources: common equity, preferred equity, straight debt, convertible debt, exchangeable debt, warrants, options, pension liabilities, executive stock options, governmental subsidies, and so on. Different securities are expected to generate different returns. The WACC is calculated taking into account the relative weights of each component of the capital structure and is used to see if the investment is worthwhile to undertake^{[1]}.
The more complex the company's capital structure, the more laborious it is to calculate the WACC.
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In general, the WACC can be calculated with the formula^{[2]}:
, where N is the number sources of capital (securities, types of liabilities); r_{i} is the required rate of return for security i; MV_{i} is the market value of all outstanding securities i.
In a simple case where the company is financed by homogeneous equity and debt, the weighted average cost of capital can be found through:
, where , where:
Symbol  Meaning  Units 

required or expected rate of return on equity, or cost of equity  %  
required or expected rate of return on borrowings before taxes  %  
risk free rate  %  
risk premium rate  %  
Beta coefficient    
corporate tax rate  %  
total debt and leases (including current portion of longterm debt and notes payable)  currency  
total market value of equity and equity equivalents or market cap (number of shares outstanding X share price)  currency  
total capital invested in the going concern  currency 

