Out of WACC?
One key financial principal can determine whether a project is worth the effort: the weighted average cost of capital (WACC). Nearly all project managers are unfamiliar with WACC and how it applies to projects. This article provides a tutorial on WACC and explains the fundamental principles behind WACC. The WACC is a combination of the interest that must be paid on any long-term borrowing (debt financing), and the promise of a particular financial return that a firm makes to shareholders or investors (equity financing). In addition, the article identifies the variety of factors WACC may be based on and explains some of the related terms that should be familiar to project managers.