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22 December, 06:59

Why do we consider the WACC to be both a marginal cost of capital as well as an average cost of capital?

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  1. 22 December, 07:15
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    The WACC is an average cost because it is a weighted average of the component costs of capital. However, each component cost is a marginal cost; that is, the cost of new capital. Thus, the WACC is the weighted average marginal cost of capital.
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