The Capital Structure Weights Which Are Used to Compute a Firm's

question 313

Multiple Choice

The capital structure weights which are used to compute a firm's weighted average cost of capital are based on the:

• A) Relative book values of the firm's debt and equity.
• B) Total face value of the outstanding debt and the book value of the firm's equity.
• C) Total face value of the outstanding debt and the market value of the firm's equity.
• D) Market value of both the firm's debt and its equity.
• E) Historical average debt-equity ratio of the firm.

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Definitions:

Market Value

The transaction value at which a service or asset is currently listed in the market.

Corporate Tax Rate

The portion of a company's earnings that is handed over to the government in the form of taxes.