Why do we calculate a firm's weighted avarage cost of capital?

The weighted average cost of capital or WACC as referred to by some,
is a calculation of the cost of a company's debt and equity financing,
in which each element: common stock, preferred stock, bonds, and all
long-term debt; is measured as a portion of the total market value of
all these elements.

The reason each element is weighted, is so that it's easier to gauge
how much interest a company is paying for each dollar it finances
(through debt and equity). You can then analyze if a firm is financing
too much of any of the above elements with respect to the cost of
these elements. In other words, by weighting each element, you can
depict if a company is financing a large portion of their total debt
and equity in a given element, which has a higher cost than other
elements, and therefore the company might be better off financing more
of their capital in an element which has a lower cost.

The actual value computed from the WACC formula represents the overall
required rate of return on the firm.

The process of valuing a company involved calculating the future cash
flows of a company, and then discounting these flows back to a present
value. The WACC is often used as the discount rate at which the future
cash flows are discounted back with.

Hope that helps.

That is a general answer.  When you say we, it depends on who.  For
the people running the company, you want to get an idea of the best
source of additional financing.  profiles.yahoo.com/testifier as an
investor, you want to see how much heat they are undertaking although
the quick ration is better to look at sometimes.  My email doesn't
work at yahoo any more, so if interested in chatting more let me know.
here is some free info, that I was never paid for.

As for NY:
1 out of 13 possible communities in New York.
There are 64 units available for seniors there.  
There are a total of 190,905 persons at least 65 there.
There are 1,301,911 that are classified as all other there; of which, 
240,000-268,000 should be between 50 and 65.
Roughly 78-82,000 should be turning 50 every five years.
FITS: average of $1,000,001
==========
As for PA:
1 out of 30 possible communities in PA.
There are 74 units available for seniors there.  
There are a total of 207,231 persons at least 65 there.  
There are 1,2652,859 that are classified as alll other there; of which, 
41,761-48,000 should be between 50 and 65.
Roughly 14-15,700 should be turning 50 every five years.
**As for info about this city; I remember from researching WSJ, a
study in 2004, that it was the first in the nation to become wireless
Doesn't fit the constraint @ average of $59,700
=========
As for MA:
0 out of possible communities known of in Massachusetts.
There are a total of 60488 persons at least 65 there.
There are 521,127 that are classified as all other there; of which, 
152,237-156,000 should be between 50 and 65.
Roughly 50,745 should be turning 50 every five years.
Much higher likelihood of Baby boomers being wired than Conneticut.
Doesn't fit the constraint @ average of $190,000
=========
As for Conneticut:
0 out of possible communities known of in Conneticut.
There are a total of 21,609 persons at least 65 there.
There are 125,391 that are classified as all other there; of which, 
33,460-35,200 should be between 50 and 65.
Roughly 11,153-11,880 should be turning 50 every five years.
Doesn't fit the constraint @ average of $147,300
========
As for NJ: 
0 out of possible communities known of in New Jersey.
In Southern New Jersey; 
There are a total of 114,000 persons at least 65 there.
There are 755,300 that are classified as all other there; of which, 
200,738 should be between 50 and 65.
Roughly 66,912-72,345 should be turning 50 every five years.
The property value contraint doens't fit.
-
In Northern New Jersey;
There are more areas that could fit the mold of 375K;  this is the
highest average of all, at roughly $271,000
There are a total of 77,937 persons at least 65 there.
There are 692,199 that are classified as all other there; of which, 
187,951 should be between 50 and 65.
Roughly 62,650-64,000 should be turning 50 every five years.
The property value contraint doens't fit; although is the closest.
-
In Central New Jersey;
There are more areas that could fit the mold of 375K; this is the
second highest average of all(in New Jersey), at roughly $217,000
The property value contraint doens't fit with highest area being at
around $207,000.
There are a total of 1786664 persons at least 65 there.
There are 1,566,904 that are classified as all other there; of which, 
421,429 should be between 50 and 65.
Roughly 421,429-425,000 should be turning 50 every five years.
This question definitely generated my curiousity as I follow
realestate appreciation.  I hope this is sufficient.