Which of the following statements regarding the determination of the weighted-average cost of capital (WACC) is not true?
A) The capital asset pricing model (CAPM) cannot be used to estimate the cost of debt for a company.
B) The capital asset pricing model (CAPM) can be used to estimate the cost of equity for a non-public company.
C) In estimating the cost of debt, the analyst typically estimates the current yield-to-maturity of the debt instruments in the company's capital structure.
D) Market, not book, values of the components of capital are preferable in terms of determining weights for the weighted-average calculation.
E) The cost of preferred stock is included in the estimation process.

Question

Quizplus · Accepted Answer

The capital asset pricing model (CAPM) is typically used to estimate the cost of equity for public companies, as it requires market data that may not be available for non-public companies.

Which of the Following Statements Regarding the Determination of the Weighted-Average