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As of today, Barclays PLC's weighted average cost of capital is 9.54% . Barclays PLC's return on invested capital is -0.54% . Barclays PLC earns returns that do not match up to its cost of capital. It will destroy value as it grows.. (Expected Return of the Market-Risk-Free Rate of Return) is also called market premium. GuruFocus requires market premium to be 7.5%. 4. GuruFocus uses last fiscal year end Interest Expense divided by the latest two-year average debt to get the simplified cost of debt.
The weighted average cost of capital is the average interest rate a company must pay to finance its assets. As such, it is also the minimum average rate of return it must earn on its current assets to satisfy its shareholders or owners, its investors, and its creditors.ACC = .50(5.85) + .50(6.5) = 6.175%. If your company uses debt and equity financing in the way suggested above, the company's weighted average cost of capital will be 6.175%. If you add other sources of financing, you will need to add their component costs, such as that for new equity or preferred stock.