Abstract
The weighted average cost of capital (WACC) is determined as the weighted
average cost of capital of all long-term sources of corporate financing. WACC is used
as a discount rate when determining the value of a company, then in investment analysis
when making a decision to accept/reject a project, as well as when evaluating the
performance of top management. The paper calculates the WACC for all non-financial
corporations that make up the basket of the Belex15 index and then examines the
relationship between the weighted average cost of capital and the profitability ratios
numbers ROA, ROE and net profit margin. The research results show that the WACC
ranges between 3.45% and 17.77% for the sample companies. Also, the results show a
negative correlation between WACC on one and selected profitability ratios on the
other hand. However, it should be noted that this relationship is statistically significant
only between WACC and net profit margin.
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References
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