Weighted Average Cost of Capital, the average rate a company pays to finance its assets, weighted by the proportion of debt and equity in its capital structure. It represents the minimum return a company must earn to satisfy all capital providers.
Acronym from 1960s corporate finance theory. 'Weighted' from Old English 'wiht' (measure), 'average' from Arabic 'awar' (damaged goods, later meaning typical), 'cost' from Latin 'constare' (to stand firm), and 'capital' from Latin 'capitalis'.
WACC is like the financial 'hurdle rate' for companies - any project that can't jump over this bar destroys shareholder value! Interestingly, companies with more debt often have lower WACC due to tax benefits, but only up to a point before financial risk overwhelms the tax savings.
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