What does WACC stand for?

WACC stands for Weighted Average Cost of Capital. This term is fundamental in finance as it represents the average rate of return a company is expected to pay its security holders to finance its assets. WACC is calculated by taking the cost of each component of the capital structure, which generally includes debt and equity, and weighting it according to the proportion that each component contributes to the total capital.

This measure is crucial for making investment decisions and assessing the viability of new projects. By understanding WACC, businesses can evaluate whether potential investments will yield sufficient returns to justify their costs. It serves as a benchmark for the minimum return that investors expect for providing capital to the company.

The other options do not accurately capture the concept or standard terminology used in finance regarding the cost of capital, and thus are not applicable in this context.