Is WACC a discount rate?

Understand the Problem

The question is asking whether WACC (Weighted Average Cost of Capital) is considered a discount rate in financial contexts. WACC is often used to determine the discount rate for evaluating investment opportunities and valuing company projects, so yes, it is treated as a discount rate.

More Information

WACC, or Weighted Average Cost of Capital, is commonly used as a discount rate in financial modeling to evaluate investment opportunities because it represents the average rate of return a company is expected to pay its capital providers, reflecting the risk associated with the company's operations.

Tips

common mistakes made when solving the problem

Sources

• Why is WACC used as discount rate - Wall Street Oasis - wallstreetoasis.com
• Weighted Average Cost of Capital (WACC): Definition and Formula - investopedia.com
• WACC Formula, Definition and Uses - Guide to Cost of Capital - corporatefinanceinstitute.com