The weighted average cost of capital is computed using weights based on:
ASales of the firm
BMarket value or book value of the components
CProfit margin
DGovernment bond yield
Answer & Solution
Correct answer: B. Market value or book value of the components
1. WACC weights can be book-value-based or market-value-based.
2. Market-value weights are theoretically preferred.
3. Book-value weights are sometimes used for convenience.
_Source: ICAI BoS CA Inter Paper 6A, Ch 4 "Cost of Capital", §10_
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