Because people are less concerned about the precision of the capital structure than they are about the accuracy of component costs, a target structure is often combined with the current component costs in arriving at a WACC.

Question

Quizplus · Accepted Answer

This statement is true. While having an accurate capital structure is important, the focus is often on determining the accurate costs of individual sources of capital. Therefore, a target structure is combined with current component costs to arrive at the weighted average cost of capital (WACC).

Because People Are Less Concerned About the Precision of the Capital