When calculating the WACC,it is standard practice to subtract ________ to compute the net debt outstanding.
A)equity
B)dividends
C)cash and risk-free securities
D)coupons
E)risk-free interest rate

Question

Quizplus · Accepted Answer

When calculating the WACC, the net debt outstanding is the debt amount that is used to calculate the cost of debt. It is generally calculated as the total debt minus any cash and risk-free securities held by the company. This is because cash and risk-free securities reduce the company's debt burden and hence the cost of debt. Therefore, subtracting cash and risk-free securities gives a more accurate measure of the company's net debt outstanding.

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