What Is Weighted Average Cost of Capital (WACC)?

The weighted average cost of capital (WACC) is a method of calculating a company’s cost of capital in which each capital type is weighted proportionately. A WACC computation takes into account all sources of capital, including common stock, preferred stock, bonds, and any other long-term debt.
Because an increase in WACC implies a drop in value and an increase in risk, it rises as the beta and rate of return on equity rise.