The mixture of financing sources used by a firm will vary from year to year,so many firms use target capital structure proportions when calculating the firm's weighted average cost of capital.

Question

Quizplus · Accepted Answer

This statement is true. Target capital structure proportions are used as a benchmark for a firm's ideal mix of financing sources. When calculating the weighted average cost of capital, the firm will use these target proportions to determine the appropriate weightings for each type of financing, even if its actual financing mix fluctuates from year to year.

The Mixture of Financing Sources Used by a Firm Will