The company cost of capital is calculated as a weighted average of the firm's debt and equity.
Weighted average cost of capital (WACC) is calculated by multiplying the cost of each capital source (debt and equity) by its relevant weight by market value, and then adding the products together to determine the total value.
The weighted average cost of capital is calculated using before-tax costs of each of the sources of financing that a firm uses in order to finance a project.
Hence, the minimum rate of return necessary to attract an investor to purchase or hold a security is called the cost of capital.
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