What is the weighted average cost of capital What is the rel

What is the weighted average cost of capital? What is the relationship between the firm\'s target capital structure and the WACC? Thread Discussion 63-Princ taton-31171unes t.introductor, (?).doo ^ Type here to search 5 8 9 a E R T Y U I O P A S D F G H JK L Z X C V B N M K ?

Solution

Weighted average cost of capital is called marginal cost of capital or minimum required rate of return. it is the weighted cost of capital which a company pay towards the total sources of finance. it is also called minimum required rate of return because it is the minimum rate of return that a business should earn for payment of finanicng obligation.

Target capital structure and WACC are interrelated because it denotes that for targeted capital how much cost would be needed and what is overall cost of financing for targeted capital structure. WACC is used for selection of sources of finance for capital structure and among all the combination, capital structure with minnimum cost of capital is preferred.