In the WACC formula, We stand for _____________.a.Cost of debtb.Weight of equity financingc.Weight of debt financingd.Cost of equity

Understanding WACC

WACC, or Weighted Average Cost of Capital, is used to measure a company's cost of capital through a weighted average of the different sources of capital, which include debt and equity.

Answering the Question

In the WACC formula:

• $W_e$ refers to the weight of equity financing in the overall capital structure.
• $W_d$ refers to the weight of debt financing.

Given the options provided:

1. a. Cost of debt - This refers to the actual interest expense a company incurs on its debt.
2. b. Weight of equity financing - This indicates the proportion of equity financing in the total capital.
3. c. Weight of debt financing - This reflects the proportion of debt financing in the total capital.
4. d. Cost of equity - This represents the return required by equity investors.

Final Answer

The correct answer is b. Weight of equity financing.