One Response for "why is wacc important to an organization and what impact does wacc have on capital budgeting and structure?"

1. 07_ShelbyGT500 September 20th, 2009 at 6:18 pm 1

   Lower WACC = Lower Risk = Higher Enterprise Value

   WACC is important for a variety of reasons:
   1) Greater range of projects the firm can take on, because with a lower WACC, more projects will have a positive NPV
   2) Greater Firm Value, and therefore, Greater Stock Price, because you discount cash flows by a smaller number

   Here, lots of good (and free) additional info from my grad school professor’s website:
   http://pages.stern.nyu.edu/~adamodar/