Q90
While calculating the weighted average cost of capital, market value weights are preferred because ____________.
A.
Book value weights are historical in nature
AnswerB.
This is in conformity with the definition of cost of capital as the investors minimum required rate of return
C.
Book value weights fluctuate violently
D.
Market value weights are fairly consistent over a period of time.
Answer: Option A
Solution
Answer: Option A
Solution:
While calculating the weighted average cost of capital, market value weights are preferred because Book value weights are historical in nature.