Which of the Following Is Not Considered a Capital Component

question 18

Multiple Choice

Which of the following is not considered a capital component for the purpose of calculating the weighted average cost of capital as it applies to capital budgeting?

• A) Long-term debt.
• B) Common stock.
• C) Short-term debt used to finance seasonal current assets.
• D) Preferred stock.
• E) All of the above are considered capital components for WACC and capital budgeting purposes.

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Definitions:

Mixed Cost

A cost composed both of variable and fixed elements, where part of the expense varies with the level of output while the rest remains constant.

Variable Element

An element in planning or statistical analysis that can change or vary, affecting the outcomes or results.

CVP Analysis

Cost-Volume-Profit Analysis, a managerial accounting technique used to analyze how changes in cost and volume affect a company's operating income and net income.

Manufacturing Costs

The total expense incurred in the process of making a product, including raw materials, labor, and overhead costs.