Weighted Average Cost of Capital (WACC)

Definition:

The formula used to determine the amount of money required for a company to pay off all of its debt, using existing assets.

Examples:

The finance committee’s calculation of the weighted average cost of capital concluded that the company would have to raise the average price of their products by seven cents.

Many investors look specifically at a company’s weighted average cost of capital, as it is a good indicator of a company’s solvency.