Week 5 Capital Components 2 - Market value on the other...

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According to the website below, in order to calculate the initial estimate of Weighted Average Cost of Capital the book value of business equity should not be used. The simplest way to understand this is that the WACC is market based. The book value is the price paid for an asset. For as long as you own this asset, the book value never changes.
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Unformatted text preview: Market value on the other hand is how much you can currently sell that asset for. This value can fluctuate for the duration that you own the asset. Sources: http://www.zanders.nl/publicaties/documents/WACC_part1.pdf http://www.investopedia.com/ask/answers/183.asp...
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