Question

The weighted average cost of capital is usually used as the firm's cost of capital.

Answer 1

true, the weighted average cost of capital is the cost arrived at by giving weight-age to all the issued capital cost like the equity capital, preference capital or debt capital. Then the weight-age of the all these cost is multiplied to the cost of the individual cost and summed up to find the weighted average cost of capital of the firm. This WACC is used for any project to find whether to accept it or not at this discount rate or WACC. This single rate of the firm can be used to check the viability of any project. This is the cost which represent the single rate expectation by the firm stakeholders.