Which of the following is not considered a capital component for the purpose of calculating the weighted average cost of capital as it applies to capital budgeting?
A) Long-term debt.
B) Common stock.
C) Accounts payable.
D) Preferred stock.
E) All of the above are considered capital components for WACC and capital budgeting purposes.

Question

Quizplus · Accepted Answer

Accounts payable is not considered a capital component for the purpose of calculating the weighted average cost of capital as it applies to capital budgeting. This is because accounts payable represents short-term debt owed to suppliers and is not a permanent source of financing. The other options (long-term debt, common stock, and preferred stock) are all considered capital components for WACC and capital budgeting purposes.

Which of the Following Is Not Considered a Capital Component