A firm's weighted average cost of capital should not do which one of the following?
A)measure the cost of short-term sources of funds
B)measure cost on a marginal basis
C)measure cost on an after-tax basis
D)measure the cost of long-term sources of funds

Question

Quizplus · Accepted Answer

The weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is proportionately weighted. Short-term sources of funds, such as accounts payable and bank loans, have their own costs that are different from the WACC. The WACC should only measure the cost of long-term sources of funds, such as debt and equity.

A Firm's Weighted Average Cost of Capital Should Not Do