What is the lowest cost component of the WACC?

The lowest cost component of the Weighted Average Cost of Capital (WACC) is typically the cost of debt. This is because interest payments on debt are often tax-deductible, effectively reducing the overall cost to the company. Furthermore, debt usually has a lower required return compared to equity, as debt holders face less risk than equity investors. Consequently, the cost of debt is often lower than the costs associated with equity financing.