In weighted average capital, capital structure weights estimation does not rely on value of__________?
Correct answer: C. Book value of equity
- A. Investors equity
- B. Market value of equity
- C. Book value of equity
- D. Stock equity
Explanation
WACC normally uses market-value weights because they reflect the current economic value of each financing source. Book value of equity is an accounting measure and is therefore not the preferred basis for these weights.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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