Opportunity Cost Of Capital Vs Wacc. The alternative to investing in the project is the opportunity to reduce capital by the amount of the investment saving the nancing costs of that capital at the wacc rate. Do not be confused by the weighted average cost of capital wacc and the marginal cost of capital.
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This is specifically attributed to the type. Wacc w d k d w p k p w c k c where w d of debt in capital structure w c of equity in capital structure w p. In turn mcc refers to the average cost of the last portion of capital raised.
Cost of capital vs.
The cost of capital refers to the required return necessary to make a project or investment worthwhile. A the wacc can be viewed as a kind of internal opportunity cost of capital. Composite cost of capital is a company s cost to finance its business determined by and commonly referred to as weighted average cost of capital wacc. Is called the firm s weighted average cost of capital wacc is specified by the following formula.
