[amp_mcq option1=”Book value weights are historical in nature” option2=”This is in conformity with the definition of cost of capital as the investors minimum required rate of return” option3=”Book value weights fluctuate violently” option4=”Market value weights are fairly consistent over a period of time.” correct=”option4″]<\/p>\n
The correct answer is: D. Market value weights are fairly consistent over a period of time.<\/strong><\/p>\n Book value weights are based on the historical cost of assets, which can be significantly different from their market value. This is because book value does not take into account changes in the market value of assets, such as changes in inflation or the overall stock market. As a result, book value weights can be very volatile and can lead to inaccurate estimates of the weighted average cost of capital.<\/p>\n Market value weights, on the other hand, are based on the current market value of assets. This means that they are more reflective of the true cost of capital to the company. Additionally, market value weights are more stable than book value weights, which makes them a more reliable measure of the weighted average cost of capital.<\/p>\n Here is a brief explanation of each option:<\/p>\n [amp_mcq option1=”Book value weights are historical in nature” option2=”This is in conformity with the definition of cost of capital as the investors minimum required rate of return” option3=”Book value weights fluctuate violently” option4=”Market value weights are fairly consistent over a period of time.” correct=”option4″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"class_list":["post-58564","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"\n\n