The WACC is just the rate at which free cash flows must
be discounted to obtain just the same result as in the
valutation using equity cash flows discounted at the
required return on equity. The WACC is neither a cost
nor a required return: it is a weighted average of a
cost and a required return. To refer to the WACC as the
"cost of capital" can be misleading because it is not a
cost. The paper presents seven errors caused by not
remembering the definition of WACC and shows the
relationship between WACC and the value of the tax
shields. pdf 2011
