The Capital Structure Weights Used in Computing the Weighted Average

question 10

Multiple Choice

The capital structure weights used in computing the weighted average cost of capital:

• A) are based on the book values of total debt and total equity.
• B) are based on the market value of the firm's debt and equity securities.
• C) are computed using the book value of the long-term debt and the book value of equity.
• D) remain constant over time unless the firm issues new securities.
• E) are restricted to the firm's debt and common stock.
• F) None of the above.

---

Definitions:

Fixture Filing

Fixture filing is a legal claim on personal property that has been attached or fixed to real estate in a manner that it is considered part of the real property.

Mechanic's Lien

A legal claim against a property for unpaid construction work or supplies, giving the contractor a right to secure payment.

Perfected Security Interest

A legal state where a creditor has taken all necessary steps required by law to enforce a security interest against the debtor's collateral in case of default.

Purchase Money Security Interest

A legal claim or lien on collateral that secures payment of the debt used to buy the collateral, often applied in context with the sale of personal property.