When calculating the WACC,it is standard practice to subtract ________ to compute the net debt outstanding.

Question

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When calculating the weighted average cost of capital (WACC), the net debt outstanding is typically calculated by subtracting the cash and any risk-free securities from the total outstanding debt. This is because cash and risk-free securities are not expected to generate any cost of capital, whereas debt and equity are. Therefore, by subtracting the cash and risk-free securities, we are left with the net amount of debt that is actually generating a cost of capital.

When Calculating the WACC,it Is Standard Practice to Subtract ________