The capital structure weights which are used to compute a ﬁrm's weighted average cost of capital are based on the:

Question

Quizplus · Accepted Answer

The capital structure weights used to compute a firm's weighted average cost of capital should be based on the market value of both the firm's debt and equity. This is because the market values reflect the current market perception of the firm's risk and future returns, while book values may not accurately represent this. Therefore, using market values provides a more accurate representation of the firm's capital structure and its associated costs.

The Capital Structure Weights Which Are Used to Compute a ﬁRm's