It Is Generally Better to Base Estimates of the WACC

question 288

True/False

It is generally better to base estimates of the WACC on book value weights of debt and equity since market values, particularly those for equity, tend to fluctuate widely.

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Definitions:

Accounts Payable

Liabilities owed by a company to its suppliers or creditors for goods and services received that have not yet been paid for.

Accounts Receivable

The money owed to a company by its customers for goods or services that have been delivered but not yet paid for.

Permanent Account

An account in the general ledger that carries its ending balance over to the next accounting period, such as assets, liabilities, and equity accounts.

Balance Sheet Accounts

Accounts that appear on the balance sheet, representing the company's assets, liabilities, and shareholders' equity at a specific point in time.