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?

Question

Quizplus · Accepted Answer

Short-term debt is not considered a capital component for the purpose of calculating the weighted average cost of capital (WACC) as it applies to capital budgeting. This is because short-term debt is typically used for working capital purposes and does not represent a long-term commitment from the company. WACC takes into account the cost of long-term debt, ordinary and preference shares, as these are sources of capital that represent a long-term commitment from the company.

Which of the Following Is Not Considered a Capital Component