In calculating the weighted average cost of capital, the weights should be estimated using the market value of the target firm's debt and equity.

Question

Quizplus · Accepted Answer

The weighted average cost of capital (WACC) is a calculation of the cost of capital for a company, taking into account the relative weights of different sources of capital, such as debt and equity. The weights used in the calculation should be based on the market value of the target firm's debt and equity, as this reflects the current market valuation of the company's financial obligations and ownership structure. Therefore, the statement is true.

In Calculating the Weighted Average Cost of Capital, the Weights