The Weights Placed on Each Source of Financing When Computing

question 336

Multiple Choice

The weights placed on each source of financing when computing the WACC are based on the:

• A) Most recent book values available.
• B) The latest book values filed with the OSC.
• C) Market value of the equity portion and the face value of the debt portion.
• D) Market value of both the equity and the debt outstanding.
• E) Par value of the equity and the face value of the debt outstanding.

---

Definitions:

Price Level Stability

A situation in an economy when overall price levels remain largely constant over time, with minimal inflation or deflation.

Phillips Curve Tradeoff

An economic theory suggesting an inverse relationship between the rate of inflation and the rate of unemployment, indicating that reducing inflation may lead to higher unemployment rates.

Fixed Incomes

Financial investments that provide returns in the form of fixed periodic payments and the eventual return of principal at maturity.

Nominal Interest Rate

The real interest rate plus the inflation rate.