AI Hub 14 November 2024 Why a Good Project Will Have an Expected Return Greater Than WACC: Are You Investing Wisely? Investing wisely requires a comprehensive understanding of crucial financial metrics that determine potential returns and risks. In this article, we will delve into the concepts of Expected Return and WACC (Weighted Average Cost of Capital), and explore how these metrics can help you make informed investment decisions. Let's start by defining these terms and understanding their significance in the investment world. Introduction Definition of Expected Return Expected Return is the anticipated value of returns an investor predicts from an investment over a specific period. It is a probabilistic measure and considers various potential outcomes, each weighted by its probability. This allows investors to gauge the likely performance of the investment and plan accordingly. Definition of WACC (Weighted Average Cost of Capital) WACC represents the average rate of return a company...
