Weighted Average Cost of Capital (WACC)

1. The weighted average cost of capital is the weighted average of the costs of the various components of capital (debt, preferred stock, and common stock or retained earnings). The weights are the market values of the different securities. An average representing the required return on all of a company's securities. Each source of capital, such as stocks, bonds, and other debt, is weighted in the calculation according to its percentage of the company's capital structure.