What key component is NOT included in the Weighted Average Cost of Capital (WACC) calculation?

The Weighted Average Cost of Capital (WACC) is a method used to calculate a company's cost of capital, taking into account the weights of each capital component. The key components included in this calculation are the cost of equity, which represents the returns required by equity investors; the cost of common stock, which refers to the returns required by shareholders on their investments in the company's common equity; and the cost of retained earnings, which represents the opportunity cost of reinvesting profits back into the company instead of paying them out as dividends.

Treasury stock, on the other hand, is stock that has been repurchased by the company and is not considered an outstanding share. It does not generate costs or returns for the company and is not included in the calculation of WACC. WACC focuses on the sources of capital that are actively being used to finance company operations and growth. Since treasury stock does not contribute to the financing of projects or operations, it is not relevant in the context of WACC. This distinction is critical for understanding how a company's financing costs are assessed and weighed in investment decisions.