Opportunity Cost Of Capital Vs Wacc. Put differently wacc is also the investment s cost of capital both debt and equity or the required return on total capital to meet the goals of the investment. Cost of capital is the total of cost of debt and cost of equity whereas wacc is the weighted average of these costs derived as a proportion of debt and equity held in the firm.
This is generally a weighted average of debt and equity referred to by the acronym wacc. Put differently wacc is also the investment s cost of capital both debt and equity or the required return on total capital to meet the goals of the investment. The cost of capital refers to the required return necessary to make a project or investment worthwhile.
More understanding opportunity cost.
A the wacc can be viewed as a kind of internal opportunity cost of capital. A capitalization rate or cap rate in the context of a business valuation is a rate of return expressed as a percentage derived by deducting a growth factor from the weighted average cost of capital wacc for a subject company. This reasoning is safer but the. Cost of capital vs.
