When Determining a Firm's Weighted Average Cost of Capital (Wacc)

question 46

Multiple Choice

When determining a firm's weighted average cost of capital (wacc) which of the following terms is NOT necessary?

• A) the firm's weight of equity financing
• B) the risk-free rate of return
• C) the firm's weight of debt financing
• D) All of the above are necessary to determine a firm's wacc.

---

Definitions:

Capital Stock

The total amount of physical assets a company owns that can be used in the production of goods and services, including buildings, machinery, and equipment.

Depreciation

The process of allocating the cost of a tangible asset over its useful life, reflecting wear and tear, decay, or a decline in value.

Gross Investment

The total amount of money spent on new capital assets, such as buildings and machinery, without deducting for depreciation.

Capital Stock

Capital stock represents the sum of all physical and financial assets owned by a company or country, used to facilitate production and operations.