The proportions of debt and equity used to determine the weighted average cost of capital for the firm is based on the market value of debt and equity outstanding.

Question

Quizplus · Accepted Answer

The weighted average cost of capital calculation considers the proportion of debt and equity used to finance the firm based on the market value of outstanding debt and equity, not their book values. This reflects the current valuation of the firm's financing sources in the market.

The Proportions of Debt and Equity Used to Determine the Weighted