Which one of the following will affect the capital structure weights used to com
ID: 2798403 • Letter: W
Question
Which one of the following will affect the capital structure weights used to compute a firm's weighted average cost of capital?
Decrease in the book value of a firm's equity
Increase in the market value of the firm's common stock
Increase in the firm's beta
Increase in the market risk premium
Decrease in a firm's tax rate
Decrease in the book value of a firm's equity
Increase in the market value of the firm's common stock
Increase in the firm's beta
Increase in the market risk premium
Decrease in a firm's tax rate
Explanation / Answer
To calculate weighted average cost of cpaital weights are assigned using market value of debt, market value of Preference dhares, market value of equity shares. Change in market value of debt, preference shares or equity shares will affect weighted average cost of cpaital.
Answer Increase in the market value of the firm's common stock
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