Which Component Is More Likely to Be Biased If Book

question 112

Multiple Choice

Which component is more likely to be biased if book values are used in the calculation of WACC rather than market values?

• A)debt.
• B)preferred stock.
• C)common stock.
• D)all categories should be equally biased.

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Definitions:

Economic Recessions

Periods of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.

Deficit Spending

The practice of a government spending more money than it receives in revenue, often used to stimulate economic growth.

Budget Cuts

The reduction in spending and allocation of funds within an organization, government, or institution, often leading to changes in services or operations.

Korean War

A conflict between North Korea, assisted by China and the Soviet Union, and South Korea, supported by the United Nations primarily led by the United States, from 1950 to 1953, which ended in an armistice.