Which of the following is NOT a capital component when calculating the weighted average cost of capital (WACC) for use in capital budgeting?
A) Accounts payable.
B) Common stock "raised" by reinvesting earnings.
C) Common stock raised by new issues.
D) Preferred stock.
E) Long-term debt.

Question

Quizplus · Accepted Answer

Accounts payable is a liability and not a form of capital, therefore it is not included in the calculation of WACC. The capital components that are included in WACC are common stock (raised by reinvesting earnings or new issues), preferred stock, and long-term debt.

Which of the Following Is NOT a Capital Component When