AT&T, Inc. (T) Q8. Cost of capital Note: if there is no allocation to preferred stocks, you can ignore the component from preferred stocks. Firm Debt Equity Preferred Amount ?? ?? ?? ?? % weight ?? ?? before-tax cost ?? ?? ?? after-tax cost ?? ?? ?? cost component = after-tax cost * % weight ?? ?? ?? weighted average cost of capital (WACC) ?? ?? 8-1 Weighted average cost of capital What does the WACC mean? 1) The average cost of financing or hurdle rate for the business 2) The average return required by the capital providers 3) The opportunity cost for the capital providers