Why Is It Important to Use Market-Based Weights Rather Than

question 90

Essay

Why is it important to use market-based weights rather than balance sheet weights when estimating a company's weighted average cost of capital?

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Definitions:

Theory Y

A management approach based on the belief that employees are intrinsically motivated and will seek out responsibility and development if given the opportunity.

Self-fulfilling Prophecies

Situations where an initially false expectation leads to its own confirmation because the expectation influences behavior to make it true.

Theory X

A management theory assuming that employees are inherently lazy and will avoid work if they can, thus needing to be closely supervised and controlled.

Theory Y

A management concept that assumes employees are intrinsically motivated, seek responsibility, and can be creative, suggesting a participative approach to management.