The cost of capital is perhaps the single most important strategic variable, providing the principal benchmark for both investment appraisal and performance measurement. The standard measurement of the cost of capital is a weighted average of the costs of debt and equity in which the weights are the respective proportions of intended debt and equity financing; this is known as the weighted average cost of capital (WACC). There are different ways of calculating WACC, however, and it is also possible to adapt the WACC to take account of differing risk levels of projects. It is also important to build in predicted inflation rates, and to do so in a consistent manner; this becomes particularly important and complex when calculating the cost of capital in the appraisal of international projects. Although WACC is a very valuable tool in investment decision making, it is important to realize that each project has its own inherent WACC and not to fall into the trap of using the same WACC for every project.