When the market values of a firm's securities have been changing dramatically,the firm may want to calculate its WACC based on ________.

Question

Quizplus · Accepted Answer

When the market values of a firm's securities have been changing dramatically, using book value, nominal or historic weights for calculating WACC may not be accurate. In such a scenario, calculating WACC based on target weights can provide a more relevant and updated estimate of the firm's cost of capital. Target weights are calculated based on the firm's desired capital structure, which takes into account the current market values of its securities.

When the Market Values of a Firm's Securities Have Been