In Many Instances, Book Value, Rather Than Market Value, May

question 88

Multiple Choice

In many instances, book value, rather than market value, may be used to determine the weighted average cost of capital. This is because of all of the following EXCEPT ____,

• A) market values change daily
• B) the market prices of the various sources of capital are not easily estimated
• C) many firms have several different issues of debt which may not be publicly held
• D) book value is a more accurate value in determining the actual cost of capital

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