To what is th weighted average cost of capital usually compared? The underlying basis of the concept of a weighted cost of capital is recognition that an organization's capital is derived from multiple sources. Within this context, therefore, the cost of capital used in analyses designed to value the assets of an organization or to evaluate investment opportunities must consider the weighted cost of capital. Cost to the organization is determined for each capital source, and weightings for capital sources reflect their proportion in an organization's total capital structure.
With respect to the issue of comparing the weighted cost of capital to other measures, there are two im
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