What is a good WACC score?
If debtholders require a 10% return on their investment and shareholders require a 20% return, then, on average, projects funded by the bag will have to return 15% to satisfy debt and equity holders. Fifteen percent is the WACC.
Is a high WACC good or bad?
WACC is not a measure of higher profitability of the company. Infact it is the opposite of that. Investors are not willing to invest in the company unless for a higher interest rate, and your cost of capital rises. Hence higher WACC is not a good thing.
What is a low WACC?
Weighted Average Cost of Capital
A high WACC indicates that a company is spending a comparatively large amount of money in order to raise capital, which means that the company may be risky. On the other hand, a low WACC indicates that the company acquires capital cheaply.
What is the WACC and why is it important?
The weighted average cost of capital (WACC) is an important financial precept that is widely used in financial circles to test whether a return on investment can exceed or meet an asset, project, or company’s cost of invested capital (equity + debt).