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The weighted average cost of capital is defined as the weighted average of a firm's:?
The weighted average cost of capital is defined as the weighted average of a firm's:
a) return on its investments.
b) cost of equity and its aftertax cost of debt.
c) pretax cost of debt and equity securities.
d) bond coupon rates.
e )dividend and capital gains yields.
4 Answers
- 1 decade ago
b) cost of equity and its aftertax cost of debt.
including tax, WACC = (cost of equity x % return of equity) + (cost of debt x % return of debt) x ( % return before tax x (1 - marginal tax rate)), in which % return of equity + % return of debt = 100%
Source(s): I'm a finance major...trust me this is correct - ?Lv 45 years ago
There is always a limit to company to grow as they already have grown in there past and now bit stagnant, and small companies are on growing stage that's why they give more return than large companies.