The cost of capital must be based on the securities' book values.

Name: The cost of capital must be based on the securities' book values.
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Question

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The cost of capital should be based on the market values of the securities, not their book values. The market value reflects the actual market demand and supply for the securities, while the book value represents their recorded value on the balance sheet. Using book values may not accurately reflect the true cost of capital, as it may be outdated or inaccurate.

The Cost of Capital Must Be Based on the Securities