The weights used to determine the relative importance of the firm's sources of capital should reflect

Question

Quizplus · Accepted Answer

The most accurate way to determine the weights for the firm's sources of capital would be to use current market values. This approach reflects the current market sentiment towards the firm's securities and takes into account any fluctuations in the stock prices, interest rates, or market conditions. Using book values or subjective adjustments may not capture the true value of the capital sources and can lead to inaccurate weighting. Using book values in accord with GAAP may also not reflect the market sentiment and may not reflect the true value of the securities. Hence, the best answer is C.

The Weights Used to Determine the Relative Importance of the Firm's