Their are only two methods which are book value method or market value method. The market value method is preferred because the reason is that the market value gives the more accurate numerical value that the securities of the company will give which is the required rate of return to its investors. However historic cost data is not useful because the value of stock and bonds keeps changing every second in the stock exchange and their is the risk that the WACC calculated is inaccurate which implies that the project appraised is also incorrect.

So the best way to calculate the weighted cost of capital is that we should use the fair value of the securities.

5 0

3 years ago

Read 2 more answers

Which are objects that fulfill the needs and wants of consumers?

Lostsunrise [7]

The objects that fulfill the needs and wants of consumers are products.

7 0

3 years ago

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demand

insens350 [35]

Answer:

Explanation:

I believe this, but I don't really know. Sorry.

6 0

2 years ago

If a company has a capital structure of $5,000,000 common stock with a cost of 17%, $2,000,000 bonds at 4%, $1,000,000 of short

rjkz [21]

Answer:

Explanation:

Weighted Average Cost of Capital; formula is as follows;

WACC = wE*re + wP*wp + wD*rd(1-tax)

where w= weight of...

r = cost of ...

E= common equity

P = preferred stock

D = Debt

Find the weights of each source of capital;

WACC = (0.50*0.17) +(0.20*0.03) + [0.20*0.04(1-0.40)] +[0.10*0.07(1-0.40)]

WACC = 0.085 +0.006 + 0.0048 + 0.0042

WACC = 0.1 or 10%

3 0

2 years ago