When using residual income, some companies prefer to use the weighted average cost of capital as a basis for determining the imputed interest charge.

Name: When using residual income, some companies prefer to use the weighted average cost of capital as a basis for determining the imputed interest charge.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

This statement is true. The weighted average cost of capital is often used as the imputed interest rate in residual income calculations as it reflects the cost of financing the company's assets.

When Using Residual Income, Some Companies Prefer to Use the Weighted