It is generally better to base estimates of the WACC on book value weights of debt and equity since market values, particularly those for equity, tend to fluctuate widely.

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It is generally better to base estimates of the Weighted Average Cost of Capital (WACC) on market value weights of debt and equity because market values more accurately reflect the current cost of capital. Book values may not represent the true economic value of these sources of finance.

It Is Generally Better to Base Estimates of the WACC