Question

6 The WACC is the required return on the firm's overall assets. True / False

6 The WACC is the required return on the firm's overall assets.

True / False

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Answer #1

True.

Explanation:

WACC Weighted Average cost of capital is an average of the cost incurred in various of sources of finance taken for financing the total assets. The weights are given on the basis of the proportion of funds employed out of total funds in respective sources.

This represents the cost which the business has incurred in the raising the finance. Therefore, this WACC represents the required rate of return which the firm expects after investing in overall assets.

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