While calculating the weighted average cost of capital, which values should one use for D, E, and V?
A)Book values
B)Liquidating values
C)Market values
D)Market value of debt and book value of equity

Question

Quizplus · Accepted Answer

Market values are the best estimates of the true value of a company's debt and equity. Book values may not reflect the true value due to factors such as historical costs and depreciation, and liquidating values are not relevant as they assume the company is being sold off in pieces. Using the market value of debt and equity will provide a more accurate measure of the overall cost of capital.

While Calculating the Weighted Average Cost of Capital, Which Values