# Weighted average cost of capital

## Description

The weighted average cost of capital is the rate that a company is expected to pay on average to all its security holders to finance its assets. It is the minimum return that a company must earn on an existing asset base to satisfy its creditors, owners, and other providers of capital, or they will invest elsewhere. In the case where the company is financed with only equity and debt, the average cost of capital is computed by the the total debt, the total shareholder’s equity, the cost of equity and the cost of debt.

Related formulas## Variables

WACC | The average cost of capital (dimensionless) |

D | The total debt (dimensionless) |

E | The total shareholder’s equity (dimensionless) |

K_{d} | The cost of debt (dimensionless) |

K_{e} | The cost of equity (dimensionless) |