CFA Practice Question

There are 233 practice questions for this study session.

CFA Practice Question

Calculation of the weighted average cost of capital requires all of the following EXCEPT determination of the ______.

A. total market value of a firm's debt (by determining the number of bonds outstanding and the current par value per bond)
B. market value of bonds outstanding relative to the total market value of the firm
C. corporate tax rate
D. current market value of a firm's equity (by finding the total number of shares and the market value per share)
E. market value of equity outstanding relative to the total market value of the firm
Correct Answer: A

User Contributed Comments 2

User Comment
dlo1 If the weighting of debt in the capital structure is based on the total market value of debt in the firm, then the number of bonds x current par value per bond is an inaccurate estimate of this weighting. The firm's debt is unlikely to be trading at par.
todolist Bonds are unlikely to be trading at par, therefore calculating mkt value of debt at par is inaccurate.
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