While book values relate to the costs of capital that a company currently employs, market values relate to the current state of capital markets. Therefore, market values represent the average cost of newly acquired capital if it were raised today.

Question

Quizplus · Accepted Answer

Market values represent the current cost of capital in the market and are therefore the average cost of newly acquired capital if it were raised today. Book values, on the other hand, represent historical costs of capital that a company has already employed.

While Book Values Relate to the Costs of Capital That