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WACC is derived by finding a firm's cost of equity & cost of debt & averaging them according to the market value of each sources. a. True b. false

WACC (weighed average cost of capital) is derived by finding a firm's cost of equity & cost of debt & averaging them according to the market value of each sources. a. True b. false

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Question added by Muhammad Zubair , CFO / Chief Accountant , RH Group
Date Posted: 2014/04/20
mohammed ismail
by mohammed ismail , Group Accounting Manager , AMS Holding Group

a.true

Mohammad Ibrahim, CMA, CertIFR
by Mohammad Ibrahim, CMA, CertIFR , Accounting Operation Team Leader , KFH ( Kuwait Finance House )

Answer ( A ) is correct .

W.A.C.C : is a firm's cost of :

1- cost of debt Financing .( Cheapest Because Of Tax Deductability ). 

2- Cost of Preferred Stocks .

3- Cost Of Equity ( Common Stocks & Retained Earnings ) .

averaging them according to the market value of each sources.

Arbab Tariq
by Arbab Tariq , FINANCE ADMINISTRATOR , Globex Trading Solutions

A

SREEDEVI SUNILKUMAR
by SREEDEVI SUNILKUMAR , Business finance officer , Emirates Airline

A. True

Muhammad Zubair
by Muhammad Zubair , CFO / Chief Accountant , RH Group

It is true

Deleted user
by Deleted user

True!

WACC = Cost of debt + cost of equity

Kindly note debt is tax free and equity is not.

Zeeshan Ehtisham
by Zeeshan Ehtisham , Head of FP&A and Business Control , Tanmiah Food Group

True

Sahar Alech
by Sahar Alech , Auditor / Financial Manager , Accounting Services Office

Averaging cost of debt and cost of equity Is WACC

naveena madhur vamana
by naveena madhur vamana , sr engineer , Tech Mahindra LTD

Weighted average cost of capital is main thing has decide and as per customer requirement,So answer is 'Yes'.