weighted average cost of capital. (vii) Tax liability of the firm is relevant for cost of capital of all the sources of funds. Weighted Average Cost of Capital The weighted average cost of capital (WACC) is a common topic in the financial management examination. If it earns more than this, value is created. The firm has 104,000 shares of common stock outstanding at a market price of $20 a share. F irst, capital budgeting is very important for corporations. Continuing illustration 19, it the firm has 18,000 equity shares of Rs. 100 each. In this year’s Cost of Capital Study, the participants represent 216 companies . = cost of equity d = is the constant dividend P 0 = the ex div market price of the share This is a variant of the formula for a PV of a perpetuity. 2. 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