Cost of Capital (WACC)
Definition
The weighted average cost of capital, representing the blended rate of return a company must earn on its assets to satisfy both debt holders and equity investors. WACC is used as the discount rate in DCF valuations and as a hurdle rate for investment decisions.
Related Terms
Related FAQ
What discount rates are appropriate for valuing intangible assets?
Intangible asset discount rates typically exceed the company's WACC, reflecting higher risk — technology assets commonly use WACC + 1-3%, customer relationships WACC + 1-2%, and brands near WACC.
Read full answer →What is a contributory asset charge and how is it calculated?
A contributory asset charge (CAC) is the economic return deducted for each supporting asset used in generating earnings, calculated as the fair value of each asset multiplied by its required rate of return.
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