The weighted average cost of capital is a way of calculating whether a company is earning a sufficient return to satisfy those providing its capital, i.e. its creditors and investors. Each element is weighted according to its proportionate share of the company's total capital. It is the cost of debt, equity and other types of capital weighted according to their relative contribution to total capital.

See also: http://www.eurojournals.com/irjfe_26_12.pdf, Discounted Cash Flow, Present Value