Which of the following is not considered a capital component for the purpose of calculating the weighted average cost of capital as it applies to capital budgeting?
A) Long-term debt.
B) Common stock.
C) Short-term debt used to finance seasonal current assets.
D) Preferred stock.
E) All of the above are considered capital components for WACC and capital budgeting purposes.

Question

Quizplus · Accepted Answer

Short-term debt used to finance seasonal current assets is not considered a capital component for the purpose of calculating the weighted average cost of capital as it applies to capital budgeting. The capital components considered for WACC and capital budgeting purposes are long-term debt, common stock, preferred stock, and retained earnings.

Which of the Following Is Not Considered a Capital Component