External Financing with Same Cost of Capital and Same Proportions as Existing: If a firm raises new capital funds in the same proportion as at present and at the same specific cost of capital as at present, then WMCC is equal to the WACC. Consider a firm having obtained 50%, 40% and 10% of the total funds by the issue of equity share capital, preference share capital and 10% debt. These sources have 10%, 9% and 5% as their specific cost of capital. Now, the WACC of the firm is:

WACC = .5 (.10) + .4(.09) + .1 (.05) = .091 or 9.1 %.

In order to finance an investment proposal of Rs. 10,00,000, the firm proposes to procure Rs. 5,00,000 by the issue of equity share capital, Rs. 4,00,000 by the issue of preference share capital and Rs. 1,00,000 by the issue of 10% debentures. It estimates that the cost of capital of additional funds will be same as at present. Since the proportion of different sources of new fi¬nancing in the total new financing is the same as at present Le., 50% equity capital, 40% prefer¬ence share capital and 10% by debentures, the WMCC can be calculated as follows:

WMCC = .5 (.10) + .4 (.09) + .1 (.05) = .091 or 9.1%.

So, the WMCC is equal to the WACC.