Weighted average cost of capital is the overall cost of capital which will be calculated by the company in order to estimate the cost of equity as well as the cost of debt and the cost of preference shares after they have been proportionated to the overall capital so it is reflection of the cost of capital which the company will be entering in order to maximize the rate of return and it will also reflect the hurdle rate for selection of projects.

The company will be using the cost of capital calculation because they need to adopted in order to understand the minimum required rate of return they are willing to accept from a particular project, and they will also considered it as a hurdle rate and they will also try to maximize the rate of return based upon comparison of with the cost of capital.