Weighted Average Cost of Equity - WACE

Weighted Average Cost of Equity - WACE

A way to calculate the cost of a company's equity that gives different weight to different aspects of the equities. Instead of lumping retained earnings, common stock, and preferred stock together, WACE provides a more accurate idea of a companies total cost of equity. Determining an accurate cost of equity for a firm is integral for the firm to be able to calculate its cost of capital. In turn, an accurate measure of the cost of capital is essential when a firm is trying to decide if a future project will be profitable or not.