What does the 'WACC' formula stand for in finance?

The 'WACC' formula stands for Weighted Average Cost of Capital, which is a crucial metric in finance that represents a firm’s average cost of capital from all sources, including equity and debt. This measure allows businesses to evaluate the cost of financing their operations or projects.

Calculating WACC involves considering the proportionate weights of each source of capital, such as equity and debt, and their respective costs, which reflects the risk and return expectations of investors. Understanding WACC is essential for decision-making processes regarding investment and valuation, as it serves as the benchmark used by firms to assess whether an investment is likely to generate sufficient returns relative to its cost.

The other options do not accurately reflect the established definition or concept in finance related to WACC, and hence do not represent valid interpretations of what WACC entails.