WACC

Weighted Average Cost of Capital: the blended return a company must earn to satisfy everyone funding it, and the discount rate for unlevered free cash flow in a DCF.

Current nameThe standards call it WACC (Weighted Average Cost of Capital), and the mechanism, the worked case and the interview question are there.

Practise it

Build a discount rate from its parts. Adjusted beta through unlever and relever, live equity risk premiums, three routes to a cost of debt.

Open WACC Builder, free, 12 min

Where WACC comes up

How to Build a DCF Model: Build Order, Terminal Value and the Sanity ChecksA DCF is 70% terminal value and 100% assumptions. Build it so both can be defended.Read the guide — 12 min DCF Interview Questions: The Ones That Actually Come UpFrom "walk me through a DCF" to the follow-ups that catch people who only memorised the steps.Read the guide — 8 min Top Investment Banking Technical Questions (With Answer Frameworks)The questions that actually get asked, the frameworks to answer them, and the traps inside each one.Read the guide — 10 min

Keep reading

DCF interview questions guide

Related Valuation terms

Cost of Equity Cost of Debt Equity Risk Premium Country Risk Premium Size Premium Adjusted Beta

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