For a company that is not planning to change its target capital structure, the proportions of debt and equity used in calculating the weighted cost of capital should be based on the current weights of the individual components.

Question

Quizplus · Accepted Answer

The market value of the individual components (debt and equity) is the most relevant measure to use when calculating the weighted cost of capital because it reflects the current market value of the company's financing. The book value, replacement value, and accounting value do not necessarily reflect the current market value and may not be as relevant in determining the company's current cost of capital.

For a Company That Is Not Planning to Change Its